News from Griffing & Company, P.C. - Beneficial Ownership Information Reporting

News & Updates

July 21, 2023

Certified Public Accountants and Consultants

Beneficial Ownership Information Reporting

It is no secret that the primary objective of FinCEN is to continuously protect our nation’s financial systems against criminal money laundering activities through extensive financial intelligence and reporting. Within the past year, FinCEN has established another reporting requirement under the Corporate Transparency Act (CTA) that requires millions of entities to report their beneficial ownership information to FinCEN. The primary goal is to aid U.S. law enforcement in combatting illegal activity by increasing the transparency of corporate ownership and specific financial transactions. (FINCEN)

According to an article from the AICPA & CIMA, “Beneficial ownership information reporting under the Corporate Transparency Act” [BOIR], beneficial owners are any individual who directly or indirectly either exercises substantial control over a reporting company or owns or controls at least 25% of the ownership interests of a reporting company. While some entities are exempt, most small corporations or LLCs will most likely be required to report their beneficial ownership information to FINCEN. For a complete list of exempted entities, please see the BOI FAQs at www.fincen.gov. The FINCEN publication titled “BOI Reporting Key Questions” also mentions that a key determining factor for whether a company will have to report this information is if they had to file a document with the state’s secretary of state or similar office to create the company or to conduct business in the U.S. Additionally, domestic entities such as corporations, limited liability companies (LLCs), or similar entities that are organized in and outside the U.S are subject to this reporting requirement. (FINCEN)

The beneficial ownership reporting requirement goes into effect January 1, 2024, and the initial CTA filing deadline is contingent on when the entity was registered to conduct U.S. business. If the entity is new (registered after December 1, 2023), then it must file within 30 days. For entities existing before January 1, 2024, they must file by January 1^st, 2025. In addition, if there are any changes to previously reported information or inaccuracies are discovered, a report must be filed within 30 days. For failing to comply with this filing requirement, taxpayers may be subject to civil penalties of up to $500/day that a violation continues and/or criminal penalties up to $10,000 and/or two years of imprisonment. An alternative option to providing this reporting information directly to FinCEN is for individuals to request and obtain a “FinCEN identifier” that can be provided in exchange for the owner’s personal information on the BOI report. (AICPA & CIMA) Unfortunately, this report is not a quick filing report; it consists of over 50 questions regarding the reporting company information, filing information, company applicant information, beneficial owners, and issuing jurisdiction.

FinCEN is authorized to release all beneficial ownership reporting information to various types of requestors such as the Department of the Treasury, Internal Revenue Service, state, local and tribal law agencies with court authorization, and financial institutions that are required to conduct customer due diligence with permission of their customer.

If you are curious as to whether you must comply with this BOI reporting requirement, do not hesitate to contact our office. Our staff is dedicated to providing you with the latest information that could impact your tax and financial reporting.

GRIFFING & COMPANY, P.C.

One Sugar Creek Center Blvd., Suite 650

Sugar Land, TX 77478

(281) 491-8866 Fax (281) 491-8998

i nfo@griffing.com

www.griffing.com