On 9/18/23, Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a guide to help small businesses comply with a new beneficial ownership information (BOI) reporting rule set to begin in 2024. The controversial final rule issued by FinCEN on September 30, 2022, implements Section 6403 of the Corporate Transparency Act (CTA), an anti-money laundering law aimed at those seeking to conceal their ownership of corporations, LLCs, or other entities in the U.S. to facilitate money laundering, tax fraud, and other illegal acts.
According to FinCEN, the new Small Entity Compliance Guide:
- Describes each of the BOI reporting rule’s provisions in simple, easy-to-read language;
- Answers key questions; and
- Provides interactive checklists, infographics, and other tools to assist businesses in complying with the reporting rule.
Did FinCEN Go Too Far?
Kevin Kuhlman, vice president of federal government relations with the National Federation of Independent Business, recently told Congress that FinCEN overreached with its broad reporting definitions and penalty requirements. “FinCEN expanded definitions of terms like “beneficial ownership” and “substantial control” far too broadly, and regular employees of companies will be swept into the reporting regime,” Kuhlman said.
FinCEN defines a beneficial owner as any individual who, directly or indirectly:
- Exercises substantial control over a reporting company; or
- Owns or controls at least 25 percent of the ownership interests of a reporting company.
FinCEN considers an individual to exercise substantial control if:
- the individual is a senior officer;
- the individual has authority to appoint or remove certain officers or a majority of directors of the reporting company;
- the individual is an important decision-maker; or
- the individual has any other form of substantial control over the reporting company.
Additionally, the American Institute of CPAs (AICPA) has recently expressed its concerns with the new rule to Congress, stating that most businesses aren’t even aware of its existence. “Without a delay and given the lack of awareness and steep penalties, we are concerned that millions of businesses, small businesses in particular, will face further hardship and confusion as they try to meet their BOI filing requirement on Jan. 1, 2024,” the AICPA said in a July statement. “In conversations with members, such as a sole practitioner in Pennsylvania, a two-person firm in New Orleans, a mid-size firm in California, we saw their shocked expressions as they learned about this reporting requirement and the associated penalties. Over and over, we have heard that their business clients were unaware FinCEN even existed, much less that this obscure government agency would be requiring sensitive, personally identifiable information in a new filing.”
Under the final rule, reporting companies created or registered before January 1, 2024, will have one year (until January 1, 2025) to file their initial reports, while reporting companies created or registered after January 1, 2024, will have 30 days to file their initial reports after receiving notice of their creation or registration.
For additional FinCEN BOI Reporting resources, visit the BOI Newsroom.
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