New FinCEN Beneficial Ownership Information Reporting Requirement under Corporate Transparency Act

The Corporate Transparency Act (“CTA”) is a new U.S. federal law that was enacted in 2020. The CTA provides certain beneficial ownership information reporting requirements. On December 7, 2021, the Financial Crimes Enforcement Network (“FinCEN”) announced in a press release that it has issued proposed regulations with information and guidelines for the implementation of the beneficial ownership information (“BOI”) reporting requirements under the CTA. The FinCEN is a U.S. federal government agency within the U.S. Treasury Department. The FinCEN Form 114 Foreign Bank Account Report (“FBAR”) is also filed on behalf of U.S. taxpayers with the FinCEN. The intent and purpose behind the CTA legislation and FinCEN’s proposed regulations are to target corruption resulting from the use of legal entities operating in the United States.

This new reporting requirement applies to “reporting companies.” A reporting company includes a company formed in the United States such as a corporation, limited liability company, or other entity formed under state law. A reporting company also includes any foreign company that is registered to do business in the United States. There are 23 types of exempt entities in the proposed regulations.

A reporting company that is not exempt would be required to file a beneficial ownership information report with information about the company, its beneficial owners, and company applicants who filed to register the formation of the company or the qualification of the company to do business in the United States. A “beneficial owner” includes any individual who (1) exercises substantial control over a reporting company, or (2) owns or controls at least 25% of the ownership interests of a reporting company. An individual is considered to have substantial control over a reporting company if they can make significant decisions on behalf of the entity. The regulations provide definitions and some exemptions.

U.S. reporting companies formed before the effective date of the FinCEN’s final regulations would have a year to file their initial BOI reports with the FinCEN. Reporting companies formed or registered after the effective date of the final regulations would need to file within 14 days after formation. The same due dates would also apply to existing and newly registered foreign reporting companies. Reporting companies would have 30 days to file an update to a report filed previously and 14 days to correct inaccurate information in a report filed previously.

Read the Beneficial Ownership Information Reporting Notice of Proposed Rulemaking (NPRM) fact sheet.

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