A new reporting of beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN) will go into effect starting January 1, 2024. Introduced as part of the Corporate Transparency Act through the Anti-Money Laundering Act of 2020, the aim of this new requirement is to reduce terrorist financing, money laundering and other illegal activity. While this new law targets multi-level private entities, many small businesses will also be subject to this new reporting.
Unlike tax or foreign bank account reporting, this specific disclosure is a separate requirement. Instead, it will be triggered upon the establishment of a new business or when there is a change in the beneficial ownership or individuals with substantial control. Existing businesses will also be required to provide this information as a “catch-up” filing.
Timelines for reporting
Current regulations provide the following timelines to report BOI information:
- For entities existing as of 12/31/23, reporting is due by 1/1/25.
- For new entities established in 2024, reporting is due within 90 days of the establishment of said entity.
- For new entities established in 2025, reporting is due within 30 days of the establishment of said entity.
- If there are entities with a change in beneficial ownership, reporting is due within 30 days of the change.
FinCEN has proposed a rule to expand the timeline of reporting to 90 days for entities established in 2024. However, this new rule has not yet been finalized, but is expected to in the coming months.
Reporting entities failing to provide this information in a timely manner may incur penalties, including $500 per day for civil penalties and a $10,000 fine and possible imprisonment in criminal penalties. Safe Harbors are allowed for reporting entities who act in good faith to correct inaccurate information within 90 days.
Determining whether you need to file
While BOI reporting provides numerous exemptions to filing, a majority of these exemptions relate to industries that are regulated under other regulations (ex: Banks and credit unions, insurance companies, utility companies). While all entities should review the reporting requirements and related exemptions, the following entities should become familiar with these new regulations:
- Small business entities with either less than 20 employees or $5 million in revenue
- Holding entities for operating or real estate
- Foreign-owned entities
- Newly established businesses or trusts
- Tax-exempt entities prior to receiving tax-exempt status
CPA firms like RKL will not be able to report this legal information to FinCEN on behalf of our clients due to the limitations on the firms’ ability to provide legal services. For more information on reporting, please review this document which provides an overview of these regulations, in addition to reviewing the Small Entity Compliance Guide published by FinCEN for a greater understanding of the reporting requirements and exemptions.
Please consult with your legal and RKL advisors with any questions regarding these reporting requirements.
