BOI Reports Required by Recent Law

The Corporate Transparency Act ( CTA ) was enacted as part of the National Defense Act for fiscal year 2021 . Under the CTA , millions of entities must report their beneficial ownership information ( BOI ) to the Financial Crimes Enforcement Network ( FinCEN ).

Who Must Report Reporting is required for all domestic and foreign entities that have filed formation or registration documents with a U . S . state or Indian tribe , unless they meet one of 23 specified exemptions . Two of the major exemptions are for : 1 . Large operating entities that meet all of these criteria : A . Employ more than 20 employees in the U . S .,

B . Had gross revenue or sales over $ 5 million reported in the previous year ’ s federal income tax return ; and

C . Have a physical office in the U . S . II . Publicly traded companies that have registered under Section 102 of the Sarbanes-Oxley Act .

Due Dates Entities created or registered before 2024 must file their BOI report by Jan . 1 , 2025 .

Entities created or registered after 2023 must file their BOI report within 30 days . Note : FinCEN proposed extending this 30-day deadline to 90 days for entities created or registered after 2023 and before 2025 . Entities created after 2024 would continue to be required to fill their initial BOI reports within 30 days of their creation or registration .

Reporting entities that have changes to previously reported information or discover errors in previously filed reports must file a new report within 30 days .

Information Required to be Reported The entity must report the following :

• The entity ’ s legal name and any trade or DBA names ;

• Business address ;

• State or tribal jurisdiction of formation or registration ; and

• IRS Taxpayer Identification Number . In addition , each reporting entity must provide the following on its beneficial owners ( and its applicant ( s )— for newly created entities ): Name ; date of birth ; address ; and unique identifying number and issuing jurisdiction from an acceptable identification document and an image of that document .

Severe Penalties for Noncompliance

• Civil Penalties : Up to $ 500 per day that a violation continues .

• Criminal Penalties : These penalties include a $ 10,000 fine and / or up to two years in prison .

Summary of BOI Report Format The following is a summary of the BOI report :

Filing Information :

1 . Type of filing : a . Initial report ; b . Correction of prior report ; c . Update of prior report ; or d . New exempt entity .

2 . Date prepared .

The report then contains these categories : Part I – Reporting Company Information Part II – Company Applicant Information Line 20 under Part II requires the following to be submitted : a . State-issued driver ’ s license ; b . State / local tribe-issued ID ; c . U . S . passport ; d . Foreign passport ; or z . Unknown . Line 31 requires the document ’ s number to be provided .

Line 32 requires the country or jurisdiction issuing the identifying document to be shown , if known . If the United States is shown and the document is issued by a state , that state then must be shown . If unknown , a box “ z ” must be checked .

Line 33 requires an image of the identifying document to be attached . Instructions for the upload process will be provided at this point . Part III – Beneficial Owner Information

Line 36 under this category requires the Beneficial Owner ’ s FinCEN ID to be provided . If not , the following must be shown :

• Full legal name ;

• Date of birth ;

• Residential address ; and

• Form of identification and issuing jurisdiction . The information required under this category is comparable to the information required under Part II for company applicants .

More Guidance Additional guidance FinCEN provided on the BOI reporting requirements includes :

• Updated FAQs ( May 11 , 2023 );

• BOI FAQs for clients ( May 11 , 2023 );

• BOI client letter ( Oct . 18 , 2023 ); and

• A small entity compliance guide . Caution : It is uncertain whether a CPA ’ s involvement in preparing and / or filing these BOI reports would be the unauthorized practice of law . For guidance , the appropriate authorities should be contacted .

Stuart R . Josephs , CPA has a San Diego-based Tax Assistance Practice that specializes in assisting practitioners in resolving their clients ’ tax questions and problems . Josephs , a past chair of the CalCPA Committee on Taxation ’ s Federal Subcommittee , can be reached at ( 619 ) 469-6999 or stuartrjosephs @ yahoo . com . www . calcpa . org DECEMBER 2023 CALIFORNIA CPA 25