FinCEN Updates FAQs on BOI Reporting

On October 3, 2024, the Financial Crimes Enforcement Network (FinCEN) released updated Frequently Asked Questions (FAQs) regarding the Beneficial Ownership Information (BOI) Reporting rule. These updates address key aspects of the Corporate Transparency Act (CTA) to provide clearer guidance to reporting entities. Since the deadline to report is quickly coming it is important to carefully review the updates to ensure your company is in compliance. To help clients, prospects, and others, Wilson Lewis has summarized the key details below.

Background

Millions of U.S. businesses are required to comply with BOI reporting rules under the CTA, with a fast-approaching deadline of January 1, 2025. The reporting requirement aims to increase transparency and combat financial crimes including money laundering and terrorism financing by mandating detailed ownership information is disclosed to FinCEN.

Despite the urgency, compliance remains low; as of November 2024, only 6.5 million of the estimated 32 million required businesses have submitted their reports. Understanding who must file, what information is required, and how to comply is critical for business owners to avoid penalties and ensure adherence to these new rules.

Key Updates — October 2024

Access to Beneficial Ownership Information (A.3 and A.6)

FinCEN clarified that access to BOI is limited to specific entities and purposes. Federal agencies, financial institutions, and law enforcement can access this information for activities such as national security investigations or due diligence. However, FinCEN emphasized that BOI is exempt from disclosure under the Freedom of Information Act (FOIA), stating that sensitive ownership information remains protected from public access.

Reporting Process (B.7, B.8, B.9. and B.10)

The update also clarifies that entities can designate employees, owners, or third-party service providers to submit BOI reports on their behalf. This flexibility helps businesses streamline compliance, particularly for those lacking in-house expertise. Importantly, FinCEN noted that non-attorney service providers handling these submissions are not considered to be engaging in the unauthorized practice of law, though interpretations of unauthorized practice may vary by state. Additionally, businesses can now report information for multiple beneficial owners or company applicants within a single submission. 

Reporting Company Clarifications (C.18, and C.19)

For companies undergoing structural changes, such as conversions from LLCs to corporations, FinCEN clarified the need for potential updates to BOI filings. In cases where state or tribal laws mandate the filing of a new registration, a new BOI report may also be required. Even when no new report is necessary, businesses must ensure their existing BOI filings accurately reflect changes such as a new name or jurisdiction of formation.

Beneficial Owner Details (D.1. D.2, D.18)

The FAQs confirm that there is no maximum number of beneficial owners that a company may report. Any individual exercising substantial control or holding at least 25% ownership must be identified. State-specific nuances also play a role. In community property states, for example, a spouse of an individual with ownership interest may also be considered a beneficial owner. To assist businesses, FinCEN’s Small Entity Compliance Guide offers checklists and examples to simplify the process.

Reporting Requirements (F.5)

FinCEN clarified that the list of acceptable identification documents includes U.S. passport cards and state-issued IDs. Businesses should note that if a beneficial owner’s legal name has recently changed and the identification document has not yet been updated, they must report the current legal name and provide updated information.

Exemptions (L.6, L.10)

FinCEN explained conditions for exemptions under the BOI Reporting Rule. Subsidiaries are exempt if they are wholly owned or controlled by one or more exempt entities. If any portion of the subsidiary is owned by a non-exempt entity, it does not qualify for the exemption. Similarly, pooled investment vehicles (PIVs) managed by SEC-registered investment advisers are exempt. However, those managed by exempt reporting advisers (ERAs) not registered with the SEC are not eligible for this exemption.

Contact Us

These updates aim to enhance clarity and compliance with BOI reporting requirements under the CTA. Businesses affected by these rules should review the updated FAQs carefully to align with the latest guidance. If you have questions about the information outlined above or need assistance with a tax or accounting issue, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.