U.S. Treasury Issues Final Rules on Beneficial Ownership Reporting Under the Corporate Transparency Act
On September 29, 2022, U.S. Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued its final rule (RIN 1506-AB49) to implement the beneficial ownership information (“BOI”) reporting required established by the 2020 Corporate Transparency Act. Under the new rules, unless they qualify for an exemption, foreign and domestic companies, including domestic corporations, limited liability companies, limited liability partnerships, business trusts and other entities will be required to report information regarding their company and beneficial owners. The rules do exempt twenty-six different types of companies from the reporting requirements – largely based on the fact that they are already subject to other government oversight (these rules after all are intended to prevent criminal actors from evading detection by using shell or front companies). The most broadly applicable exemption is for companies that (1) have at least twenty full-time employees in the U.S., (2) have a physical office in the U.S. and (3) file U.S. taxes with at least $5 million in gross sales.
Those business that do not qualify for an exemption and which will be subjected to the new rules will be required to make an initial filing with FinCen by the end of 2024, and thereafter report any changes to their beneficial owners within 30 days of the change. New businesses established after the filing deadline will be required to file their initial report within 30 days of their formation. Failure to comply with the rules may result in penalties (including criminal penalties if the violation is willful) for the company and its senior officers.
While it is still over two years before the filings must be made, new and existing businesses, in particular small businesses that don’t qualify for an exemption, will need to be working carefully to make sure that they will be in a position to comply and complete their filing on time.