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An Update to The Corporate Transparency Act
Since we first posted about the Corporate Transparency Act and the Beneficial Ownership Reporting requirement on March 30, 2021, additional guidance has emerged. The basics of this Act have been covered in prior posts, so this post will discuss more specific matters and identify some issues that have not yet been clarified.
FinCEN Beneficial Ownership Secure System (BOSS)
All reporting should occur on FinCEN’s Beneficial Secure System (BOSS) at https://www.fincen.gov/boi. Currently, no receipt is emailed after you submit your report, so you should screenshot the final page for your own records after you finish registering. If you did not screenshot that screen, you can always document that you filed this report internally with a contemporaneous affidavit.
The information is intended to be secure and not public information – or subject to Freedom of Information requests – but federal and state agencies will be able to access this information.
Reporting Deadlines
- If the entity was created prior to January 1, 2024, you have until January 1, 2025, to report the beneficial ownership information with FinCEN.
- If created in 2024, you have ninety (90) calendar days after receiving notice that your Company’s creation or registration is effective, whichever is earlier.
- If created or registered after January 1, 2025, you have thirty (30) calendar days after receiving notice that your Company’s creation or registration is effective, whichever is earlier.
- Any updates or corrections to the BOI filing must be submitted to FinCEN within thirty (30) days. This includes a change of name, change in ownership, change in address of entity and beneficial owners, and change in identification (passport or photo identification expiring).
Reporting Requirements for Charities
The Act includes 23 entity types exempt from filing requirements, one of which is nonprofits registered under 501(c). However, there are a couple of issues with this requirement.
One, many nonprofits are not registered under 501(c). Examples include:
- 501(d) (Religious and Apostolic Associations)
- 501(e) (Cooperative Hospital Service Organizations)
- 501(f) (Cooperative Service Organizations of Operating Education Organizations)
- 501(k) (Publicly available Child Care Organizations)
- 501(n) (Charitable Risk Pools)
- some community associations, including homeowner associations and condominium associations.
- nonprofits that do not have to file for 501(c) recognition, such as churches, associations of churches, and conventions of churches.
All of these types of nonprofits will have to report their beneficial ownership information, including board member information, and update that information every time a board member is added to the board or a board member leaves the board.
Two, the reporting requirement will require all recently formed nonprofits (as entities registered with a state) to register at least once with FinCEN. The rules require that a nonprofit have a 501(c) registration, which is impossible to obtain within thirty (30) calendar days of formation.
People without Identification
The Act requires beneficial owners to report their legal name, date of birth, address, identification number, and a photo of the identification card. It is common for people not to have photo identification, especially in Lancaster County, where we have a large population of Amish and Mennonites. We do not know the expectations for these small businesses and how beneficial owners without photo identification are expected to remain compliant.
Penalties for Non-Compliance
The penalties for providing false information or failing to file a report are quite steep. The civil penalties increase annually for inflation. Effective January 25, 2024, the civil penalty is $591.00 a day. Criminal penalties include a fine of up to $10,000.00 and imprisonment for up to two years. It is also a crime under the federal criminal code to knowingly and willfully providing false information to, or conceal a material fact from, the federal government, and you can also face penalties under that section of the criminal code. In addition to actual owners of a company, senior officers may also be held individually responsible.
The Act also provides a safe harbor for corrections if a company files a corrected report is filed within 90 days of awareness of inaccuracy.
Small Business Compliance Guide
FinCEN has issued a Small Entity Compliance Guide that can be located at https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf which provides additional guidance to small businesses.
In navigating the complexities of the Corporate Transparency Act and its Beneficial Ownership Reporting requirement, staying informed and compliant is paramount. Remember, all reporting should occur through FinCEN’s Beneficial Ownership Secure System (BOSS), with deadlines varying based on the entity’s creation date. For nonprofits and entities without traditional identification, challenges may arise, but resources such as FinCEN’s Small Entity Compliance Guide offer guidance. While the penalties for non-compliance are stringent, the Act provides avenues for corrections within a specified timeframe. By understanding and adhering to these regulations, small businesses can navigate the landscape with confidence and integrity. Stay informed, stay compliant, and safeguard your business’s interests in the evolving regulatory environment. Consult with an experienced business attorney if you have questions.