a photo of the U.S. Capitol Building in Washington D.C.
ComplianceJanuary 02, 2024|UpdatedSeptember 17, 2024

FinCEN’s beneficial ownership information reporting and access rules – a quick review

The Corporate Transparency Act (CTA) requires “reporting companies” to file a report with the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) containing personal identifying information about the company’s beneficial owners and applicants. The information collected will be kept in a private database maintained by FinCEN with access limited to certain requestors.

The details for how this reporting obligation will be implemented and how access will be provided to the information were left for FinCEN to provide through rulemaking. On September 29, 2022, FinCEN issued a final rule implementing the beneficial ownership (BOI) reporting requirements. On December 22, 2023, FinCEN issued a final rule that sets forth the circumstances under which beneficial ownership information (BOI) may be disclosed to authorized BOI recipients. Below is a summary of some of the major issues addressed by these final rules.

1. What is a “reporting company”?

A domestic reporting company is defined as any entity that is a corporation, a limited liability company, or is created by the filing of a document with a Secretary of State or similar office under the law of a state or Indian tribe.

A foreign reporting company is defined as any entity that is a corporation, a limited liability company, or other entity formed under the law of a foreign country and registered to do business in any state or tribal jurisdiction by the filing of a document with a Secretary of State or similar office under the law of a state or Indian tribe.

2. What entities are exempt from the definition of “reporting company” and therefore do not have to file a BOI report?

There are 23 exemptions. Most are for companies that are already subject to substantial federal or state regulation under which their beneficial ownership may already be known. This includes, among others, entities that file reports with the SEC, governmental authorities, banks, credit unions, money services businesses, investment advisors, securities brokers and dealers, tax exempt entities, entities assisting tax exempt entities, insurance companies, state-licensed insurance producers, pooled investment vehicles, public utilities, inactive entities, subsidiaries of certain exempt entities, accounting firms, and large operating companies.

Related resource: The 23 exemptions from the Corporate Transparency Act’s beneficial ownership information reporting requirement.

3. What is a “large operating company”?

The exemption for a “large operating company” is available to any entity that (1) employs more than 20 full time employees in the United States, (2) has an operating presence at a physical office within the United States, and (3) has filed a federal income tax or information return in the United States for the previous year demonstrating more than $5 million in gross receipts or sales on the entity’s IRS Form 1120 or other applicable IRS form, excluding gross receipts or sales from sources outside the United States, as determined under Federal income tax principles.

Related resource: What is the large operating company exemption under the Corporate Transparency Act?

4. When is the initial BOI report required to be filed with FinCEN?

Any domestic reporting company created on or after January 1, 2024 and before January 1, 2025, and any entity that becomes a foreign reporting company on or after January 1, 2024 and before January 1, 2025, must file a report within 90 calendar days of either receiving actual notice that its creation or registration has become effective or the Secretary of State or similar office first providing public notice it’s been created.

Any domestic reporting company created on or after January 1, 2025, and any entity that becomes a foreign reporting company on or after January 1, 2025, must file a report within 30 calendar days of either receiving actual notice that its creation or registration has become effective or the Secretary of State or similar office first providing public notice it’s been created.

A domestic reporting company created before January 1, 2024, and an entity that became a foreign reporting company before January 1, 2024, must file a report not later than January 1, 2025.

5. What information is required to be set forth in the initial report?

Information must be provided about the reporting company, its beneficial owners, and its company applicants.

A. Information about the reporting company:

  1. its full legal name,
  2. any trade or “doing business as” names,
  3. a complete current address consisting of: (i) in the case of a reporting company with a principal place of business in the United States, the street address of the principal place of business, and (ii) in all other cases, the street address of the primary location in the United States where the reporting company conducts business,
  4. the state, tribal or foreign jurisdiction of formation,
  5. for a foreign reporting company, the state or tribal jurisdiction where the company first registers, and
  6. the IRS Taxpayer Identification Number (TIN) (including an Employer Identification Number) or where a foreign reporting company has not been issued a TIN, a tax identification number issued by a foreign jurisdiction and the name of that jurisdiction.

B. Information about each of the individuals who are the company’s beneficial owners and applicants:

  1. full legal name,
  2. date of birth,
  3. complete current address consisting of: (i) in the case of a company applicant who forms or registers an entity in the course of the company applicant’s business, the street address of the business, or (ii) in any other case, the individual’s residential street address,
  4. unique identifying number and the issuing jurisdiction from one of the following documents: (i) a non-expired passport issued to the individual by the United States government, (ii) a non-expired identification document issued to the individual by a State, local government, or Indian tribe for the purpose of identifying the individual, (iii) a non-expired driver’s license issued to the individual by a State, or (iv) a non-expired passport issued by a foreign government to the individual, if the individual does not possess any of the other documents described, and
  5. an image of the document from which the unique identifying number was obtained.

6. Do reporting companies existing before January 1, 2024, have to provide company applicant information?

If a reporting company was created or registered before January 1, 2024, the reporting company must report that fact but is not required to report information with respect to any company applicant.

7. When are updated reports required to be filed?

If there is any change concerning required information previously submitted to FinCEN concerning a reporting company or its beneficial owners, including any change concerning who is a beneficial owner or information reported for any particular beneficial owner, the reporting company must file an updated report within 30 calendar days after the date on which the change occurs.

8. When are corrected reports required to be filed?

If any report was inaccurate when filed and remains inaccurate, the reporting company must file a corrected report within 30 calendar days after the date on which the reporting company becomes aware or has reason to know of the inaccuracy.

Next Steps for Your Business

Is your company required to file a beneficial ownership report?

9. What does a company do upon a change in its status as a reporting company or an exempt entity?

Any entity that was exempt but that no longer meets the criteria for any exemption must file a BOI report within 30 calendar days after the date that it no longer meets the criteria for any exemption.

If a reporting company meets the criteria for any exemption subsequent to the filing of an initial report, this change will be deemed a change with respect to information previously submitted to FinCEN, and the entity must file an updated report.

10. What is a FinCEN identifier and how is it obtained?

A FinCEN identifier is a unique number issued by FinCEN to individuals and reporting companies. An individual may submit an application for a FinCEN identifier that contains all of the information that otherwise has to be set forth in the initial report about that individual. An individual who has obtained a FinCEN identifier may provide it to the reporting company and the reporting company can include the FinCEN identifier in lieu of the information otherwise required.

A reporting company may obtain a FinCEN identifier by checking a box when it files an initial or updated BOIR.

11. Who is considered to be a “beneficial owner”?

A beneficial owner is defined as any individual who, directly or indirectly, either exercises substantial control over the reporting company or owns or controls at least 25 percent of the ownership interests of the reporting company.

12. What is considered “substantial control” over a reporting company?

An individual exercises substantial control over a reporting company if the individual (1) serves as a senior officer, (2) has authority over the appointment or removal of senior officers or a majority of the board of directors or similar body, (3) directs, determines, or has substantial influence over important decisions made by the reporting company, including among others, (i) the nature, scope, and attributes of its business including the sale, lease, mortgage, or other transfer of any principal assets, (ii) a reorganization, dissolution, or merger, (iii) major expenditures or investments, issuances of any equity, incurrence of any significant debt, or approval of the operating budget, (iv) the selection or termination of business lines or ventures, (v) compensation schemes and incentive programs for senior officers, (vi) the entry into or termination, or the fulfilment or non-fulfilment, of significant contracts, or (vii) amendments of any substantial governance documents, or (4) has any other form of substantial control over the reporting company.

13. Who is a “company applicant”?

For a domestic reporting company, a company applicant is the individual who directly files the document that creates the domestic reporting company. For a foreign reporting company, a company applicant is the individual who directly files the document that first registers the foreign reporting company. For both a domestic and a foreign reporting company, a company applicant is also the individual who is primarily responsible for directing or controlling the filing if more than one individual is involved in the filing of the document.

14. What is a reporting violation?

It is unlawful for any person to wilfully provide, or attempt to provide, false or fraudulent beneficial ownership information, including a false or fraudulent identifying photograph or document, to FinCEN or to wilfully fail to report complete or updated beneficial ownership information to FinCEN. The term “person” includes any individual, reporting company, or other entity. The term “beneficial ownership information” includes any information provided to FinCEN pursuant to this rule.

15. Who is FinCEN authorized to disclose BOI to?

FinCEN may disclose BOI to the following six categories of requestors:

  1. Federal agencies engaged in national security, intelligence, or law enforcement activity if the requested BOI is for use in furtherance of such activity.
  2. State, local, and Tribal law enforcement agencies if a court of competent jurisdiction has authorized it to seek the information in a criminal or civil investigation.
  3. A Federal agency for transmission to a foreign law enforcement agency, prosecutor, judge, foreign central authority, or foreign competent authority who initiated the request, provided that the request is for assistance in a law enforcement investigation or prosecution, or for a national security or intelligence activity authorized under the laws of the foreign country, and the request is made under an international treaty, agreement, or convention; or if no treaty, agreement or convention is available, as an official request determined to be from a trusted foreign country.
  4. Financial institutions using BOI to facilitate compliance with customer due diligence requirements under applicable law, provided that before making the request they have obtained and documented the reporting company’s consent.
  5. Federal functional regulators and other appropriate regulatory agencies acting in a supervisory capacity assessing financial institutions for compliance with customer due diligence requirements.
  6. Any Treasury Department officer or employee (1) whose official duties require BOI inspection or disclosure, or (2) for tax administration.

16. What requirements must requestors meet to access BOI?

Domestic agencies must satisfy several security and confidentiality requirements outlined in the Access Rule, including establishing standards and procedures to protect the security and confidentiality of BOI, establishing and maintaining a secure system in which to store BOI, and conducting an annual audit to verify appropriate use of BOI. Financial institutions must develop and implement administrative, technical, and physical safeguards reasonably designed to protect the information.

17. Can BOI recipients re-disclose BOI?

Authorized BOI recipients are prohibited from re-disclosing BOI except in certain specific circumstances, including re-disclosures within the same recipient, or to courts of competent jurisdiction or prosecutors for use in litigation related to the activity for which the requesting agency requested the information. FinCEN may also authorize the re-disclosure of BOI by an authorized recipient in other situations, so long as the re-disclosure is for an authorized purpose.

Conclusion

These final rules are two of three rulemakings planned to implement the CTA. There will also be a rulemaking to revise FinCEN’s customer due diligence rule. The final rules and other reference materials can be accessed from FinCEN’s website here. https://www.fincen.gov/boi/Reference-materials

Learn more

To learn more about how CT Corporation can help, contact a CT Corporation service representative or visit our Corporate Transparency Act resource page where you can sign up for updates.

Sandra Feldman
Publications Attorney
Sandra (Sandy) Feldman has been with CT Corporation since 1985 and has been the Publications Attorney since 1988. Sandy stays on top of the most pressing and pertinent business entity law issues that impact CT customers of all sizes and segments.
Back To Top