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Tax & AccountingMay 09, 2024

New Corporate Transparency Act BOI FAQs clarify reporting requirements and database access

The landscape of Corporate Transparency Act (CTA) Beneficial Ownership Information (BOI) reporting continues to evolve, and accountants and others who advise their small business clients need to stay ahead of the curve.  

FinCEN's April 18, 2024, update to the BOI FAQs offers crucial insights, impacting everything from homeowner association (HOA) filing requirements to clarifying that S Corporations are considered "corporations" for reporting company purposes and the timeline for accessing the BOI database. 

Non-compliance isn't an option for most entities. 

The new FAQs reiterate the potential consequences of neglecting BOI reporting obligations. Civil penalties – which are annually adjusted for inflation – can reach up to $591 per day, while criminal penalties include imprisonment and hefty fines (FAQ K.2. what penalties do individuals face for violating BOI reporting requirements).  

What about the NSBA ruling? 

Yes, for the time being, BOI reporting is suspended for the 60,000 or so National Small Business Association (NSBA) members. In case you missed it, the NSBA won a summary judgment in March of 2024, preventing the Corporate Transparency Act's BOI reporting requirements from being enforced upon its roughly 60,000 members while the ruling goes through the appeals process.  

However, FinCEN has said it will continue implementing the Corporate Transparency Act and BOI requirements as required by Congress while complying with the court order. Even after the NSBA ruling, roughly 33 million entities currently fall under FinCEN's purview, in addition to the 5 million new entities expected to be added in 2024 and each year through 2034. Many legal experts do believe that the government will prevail in the courts and the constitutionality of the CTA will be upheld. 

HOAs on notice: Reporting is likely required.

While the answer to "are homeowners associations considered reporting companies and required to file BOI reports?" is still "it depends," the April 18 update has helped clarify the path to yes or no.  

According to the update, most HOAs incorporated or created by filing a document with a secretary of state or similar office may fall under the definition of "reporting companies" and, therefore, must report BOI information (FAQ C.10. are homeowners associations reporting companies).  

Exemptions are limited and specific. According to the new FAQ, only unincorporated HOAs or those designated as social welfare organizations under IRC 501(c)(4) may be exempt. 

Learn more about Social Welfare Organizations, IRC 501(c)(4), and similar topics on CCH AnswerConnect.

The time to act for Homeowners Associations is rapidly approaching. 

With the January 1, 2025 deadline for pre-2024 associations looming, it's time for action. Homeowners Associations formed in 2024 must take particular note since, unlike their pre-2024 colleagues, they only have 90 days from their formation date to file.  

To avoid year-end congestion and stress, many advisors are encouraging their pre-2024 business clients to file their initial BOI reports early, ideally in the next few months. 

S-Corporations aren't exempt based on structure type. 

Under this update, the FAQs clarify that any S-Corporation that qualifies as a reporting company – and is not otherwise exempt from reporting – must comply with BOI reporting requirements. The S-Corp pass-through structure for tax purposes does not affect reporting obligations or make it a "tax-exempt entity" under FinCEN BOI reporting regulations (FAQ C.8. do the BOI reporting requirements apply to S-Corporations). 

Entities losing their exempt status in 2024 get a glimpse of relief. 

The new FAQs include some breathing room for certain companies that lose their exempt status between now and January 1, 2025.  

Companies created before January 1, 2024, and that lose their exempt status during 2024 have an extended deadline to file their initial BOI report: January 1, 2025, or 30 calendar days after losing their exempt status, whichever is later (FAQ G.6. how long does a company that was exempt and loses their exemption have to file). 

The FAQs provide this example: if an existing reporting company ceases to be exempt on February 1, 2024, it will have until January 1, 2025, to file its initial BOI report. If it ceases to be exempt on December 15, 2024, it will have until January 14, 2025, to file its initial BOI report. 

BOI database: Who gets access, and when?

The wait for accessing the BOI database continues for some stakeholders. FinCEN plans a phased approach throughout 2024 and into 2025. Here's a breakdown of the expected phases and who is expected to get access: 

Phase one: Spring 2024  

Who gets access: a "handful" of federal agency users kick-start access since phase one is a pilot program. 

Phase two: Summer 2024 

Who gets access: treasury offices and other federal agencies involved in law enforcement and national security who already have memoranda of understanding for access to Bank Secrecy Act information. 

Phase three: Fall 2024

Who gets access: the net widens to additional Federal agencies engaged in law enforcement, national security, and intelligence activities, as well as State, local, and Tribal law enforcement partners. 

Phase four: Winter 2024 

Who gets access: intermediary federal agencies involved in processing foreign government requests. 

Spring 2025

Who gets access: financial institutions, subject to customer due diligence requirements under applicable law. 

Currently, no other governmental entity, organization, business, or individual has access to the BOI database, despite being almost four months into populating the database (O.1 when will authorized recipients have access to beneficial ownership information). 

A word on the IRS and BOI access 

While not mentioned in the new FAQs – or elsewhere – as part of the U.S. Treasury Department, it's not unlikely that the IRS could be granted access to BOI information, especially during criminal investigations.  

Expect additional guidance from the Treasury regarding under what circumstances and to what extent FinCEN would grant the IRS access to BOI information. 

New FAQs provide some clarity; expect more guidance for further clarity. 

While the new FAQs answer some important questions, many lingering concerns remain. One ongoing issue the new FAQs don't address is the critical need to educate the tens of millions of entities obligated to report under the Corporate Transparency Act.  

As to the NSBA and other cases challenging the constitutionality of the CTA, many experts believe one of two outcomes will occur: 1) the courts will ultimately find the CTA constitutional, or 2) Congress will amend the law to eliminate the issues that could lead to a finding that it is unconstitutional. 

As we carefully watch these cases move through the court system, we can expect continuing FinCEN guidance throughout the year. 

Mark Friedlich
Vice President of US Affairs for Wolters Kluwer Tax & Accounting
Mark Friedlich, a CPA & tax lawyer, is the Vice President of US Affairs for Wolters Kluwer Tax & Accounting. He is a member of the U.S. Senate Finance Committee’s Chief Tax Counsel’s Advisory Board, advisor to 14 state taxing authorities, and has been a member of the American Bar Association’s Tax Section and AICPA’s Tax Section leadership teams. Prior to joining Wolters Kluwer he was a COO and Principal at PwC.


Beneficial Ownership Information Reporting
What public accounting firms and professionals need to know about reporting under the Corporate Transparency Act.
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