MVA White Collar Defense, Investigations, and Regulatory Advice Blog

Most entities formed or registered to do business in the U.S. will, beginning January 1, 2024, be required to self-report beneficial ownership information to the U.S. Treasury’s Financial Crimes Enforcement Network (“FinCEN”). The new federal database, to be known as “BOSS” (Beneficial Ownership Secure System), is not yet online, but FinCEN on Friday, September 30 published the final regulations[1] implementing beneficial ownership information disclosure requirements pursuant to the Corporate Transparency Act (“CTA”)[2] passed by Congress in 2021. FinCEN estimates that, at the effective date, these regulations will apply to 32,556,929 existing entities.

This alert highlights modifications FinCEN made to the regulatory regime laid out in its December 8, 2021 advance notice of proposed rulemaking (See Moore & Van Allen’s January, 2022 article: CTA Advice) and provides a short summary of the information reporting companies will need to collect and disclose. MVA will continue to monitor CTA releases and will be prepared to assist with submissions when BOSS becomes active.

1. The effective date of the regulations is January 1, 2024 (previously anticipated to be effective January 1, 2023). Existing companies required to report will have one (1) year from the effective date to file;[3] companies formed from and after January 1, 2024 will need to file within thirty (30) calendar days of formation[4] (an extension from the fourteen (14) days originally proposed).
2. As implicated in the prior sentence, the CTA is retroactive; entities formed before passage of the CTA will still have to file unless part of an exempt class.
3. There are 23 exemptions, but most pertinent for MVA’s clients are exemptions which allow the following entities NOT to report:
   • “Large operating companies” - entities with a physical presence in the United States employing 20 or more persons full-time (in the United States) and with gross receipts of $5,000,000 or more;[5]
   • Publicly listed companies or other entities registered with and regulatory reporting to the SEC;[6]
   • Banks and credit unions;[7]
   • Tax-exempt entities;[8]
   • Charitable trusts;[9]
   • “Inactive entities” - entities created before 2020 that are currently dormant and hold no assets;[10]
   • domestic pooled investment vehicles (e.g. REITs and joint ventures) if they are advised by a banks, credit union or registered investment advisor.[11]
4. Entities which are wholly-owned or controlled, directly or indirectly, by exempt companies are also exempt[12] (e.g., wholly-owned subsidiaries of large operating companies are exempt). FinCEN’s comments in the final rule clarify that entities which are, for example, majority-owned by an exempt entity will still be considered reporting entities if not eligible for any other exemption, but may identify the exempt entity as an owner in lieu of submitting information about an ultimate beneficial owner whose interest is held through the exempt entity.[13]
5. The information required of reporting companies has not changed. Reports must identify full legal name, date of birth, current address and unique identifiers (social security number or similar) of (a) beneficial owners (direct or indirect holders of 25% or more of the reporting entity or persons (to include senior officers) exercising “substantial control” of the entity and (b) with one exception, the filer or person directing the formation filing (a “Company applicant”).[14] Each reporting company must also disclose its own legal name, any d/b/a under which it conducts business, its business street address, its jurisdiction of formation (or, for a foreign reporting entity, the jurisdiction of registration), and its employer identification number.[15]
6. Reporting companies must update or correct filed information. Updates to beneficial ownership must be filed within thirty (30) calendar days of the change. Corrected reports must be filed within thirty (30) calendar days after the date a reporting company becomes aware of an inaccuracy.[16] This is consistent with FinCEN’s position in the advanced notice of proposed rulemaking but imposes a tighter timeline than the one (1) year permitted under the CTA.[17]

Please contact us with questions regarding these regulations or the interpretation of any of the items noted above. 

[1] Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. 59498 (Sept. 30, 2022)(to be codified at 31 CFR Part 1010)

[2] Title XIV of the William M. (Mac) Thornberry National Defense Authorization Act for 2021, Public Law 116-283, (2021).  The CTA adds a new section, 31 U.S.C. 5336 to the Bank Secrecy Act (Subchapter II o Chapter 53 of Title 31, United States Code). 

[3] To be codified at 31 CFR 1010.380(a)(iii).

[4] To be codified at 31CFR 1010.380(a)(i).

[5] To be codified at 31CFR 1010.380(c)(1)(xxi).

[6] To be codified at 31 CFR 1010.380(c)(2)(i). 

[7] To be codified at 31 CFR 1010.380(c)(2)(iii) and (iv).

[8] To be codified at 31 CFR1010.380(c)(2)(xix).

[9] Trusts defined under Section 4947(a)(1) or (2) of the Internal Revenue Code. To be codified at 31 CFR 1010.380(c)(3)(xix)(C).

[10] To be codified at 31 CFR 1010.380(c)(2)(xxiii).

[11] To be codified at 31 CFR 1010.380(c)(2)(xxviii).

[12] To be codified at 31 CFR 1010.380(c)(2)(xxii).

[13] Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. 59543 (Sept. 30, 2022).  Permission to report exempt entity instead of ultimate beneficial owner to be codified at 31 CFR 1010.380(b)(2)(i).

[14] To be codified at 31 CFR 1010.380(b)(1)(ii).  Entities created prior to January 1, 2024 do not have to report information with respect to company applicants.  Id., subpart (iv)

[15] To be codified at 31 CFR 1010.380(b)(1)(i). 

[16] To be codified at 31 CFR 1010.380(a)(2).

[17] 31 U.S.C. 5336(b)(1)(D).