Treasury’s Financial Crimes Enforcement Network (FinCEN) has published a guide to help small businesses navigate the new rules for reporting beneficial ownership information (BOI), which will begin on Jan. 1, 2024.
The Small Entity Compliance Guide, which FinCEN posted Monday, describes each of the BOI reporting rules provisions; answers key questions; and provides interactive checklists, infographics, and other tools to assist businesses with compliance, FinCEN said in a news release.
The BOI reporting requirement is an anti-money laundering initiative enacted through the Corporate Transparency Act, P.L. 116-283, in 2021 that mandates BOI be reported to FinCEN. The requirement would apply to most companies.
“This is also a critical step towards implementing the Corporate Transparency Act, which will help the Treasury Department and FinCEN expose bad actors abusing the U.S. financial system by hiding their identity behind opaque corporate structures,” Brian Nelson, undersecretary of the Treasury for terrorism and financial intelligence, said in the release.
The guide addresses six key questions for complying with the BOI reporting rule: Does my company have to report its beneficial owners? Who is a beneficial owner of my company? Does my company have to report its company applicants? What specific information does my company need to report? When and how should my company file its initial BOI report? What if there are changes or inaccuracies in reported information?
FinCEN describes a company’s beneficial owners as the persons “who ultimately own or control the reporting companies.” Disclosing information about them will “help law enforcement and national security agencies prevent and combat money laundering, terrorist financing, tax fraud, and other illicit activity, as well as protect national security,” FinCEN said in its Notice of Proposed Rulemaking (RIN 1506-AB59) issued in December 2022.
Companies will be able to report BOI to FinCEN on Jan. 1, 2024, when the requirements become effective. Reporting companies created or registered to do business before Jan. 1, 2024, will have additional time — until Jan. 1, 2025 — to file their initial BOI reports. Reporting companies created or registered on or after Jan. 1, 2024, will have 30 days after receiving notice of their company’s creation or registration to file their initial BOI reports.
FinCEN said in the release that it will provide additional guidance on how to submit beneficial ownership information soon. Small businesses can continue to monitor FinCEN’s website for more information or subscribe to FinCEN updates. They also may contact FinCEN with questions about the BOI reporting requirements at this web page.
As first stated in its September 2022 regulatory impact analysis, FinCEN said it is difficult to estimate the number of entities that are reporting companies. It assumes that all entities created or registered before the effective date of Jan. 1, 2024, that are subject to the BOI reporting requirement — 32.6 million entities — will submit initial BOI reports in the first year. In 2025 and beyond, FinCEN estimates that almost 5 million initial BOI reports will be filed each year — the same estimate as the number of new entities per year that meet the definition of a reporting company and are not exempt. The total five-year average of expected BOI initial reports is about 10.5 million.
FinCEN estimates about 6.6 million BOI update reports will be filed in 2024, and about 14.5 million such reports will be filed annually for 2025 and beyond. The total five-year average of expected BOI update reports is almost 12.9 million.
In a statement to Congress in July, the AICPA cited the comprehensive nature of the BOI reporting rules and small businesses not being aware of the rules as reasons to delay their effective date.
“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 statement read.
The statement was submitted to be included in the record for a July 18 hearing of a subcommittee of the House Financial Services Committee.
The Small Entity Compliance Guide states that FinCEN is conducting outreach “to ensure that all reporting companies are aware of their reporting obligations, including their obligations to update or correct beneficial ownership information,” but it does not provide details on that outreach.
The AICPA also joined a coalition of organizations to raise awareness of the BOI reporting requirement. The AICPA also submitted comments to FinCEN in February 2022, urging it to consider the burden and cost imposed by BOI reporting requirements.
In a letter to Rep. Patrick McHenry, chair of the House Financial Services Committee, the AICPA said it supports the Protecting Small Business Information Act of 2023, H.R. 4035, which would delay the start of BOI reporting.