BOI Reporting Exemptions

Prepare your entity for new reporting requirements January 1, 2024.

Share this article!

Introduction

As part of ongoing efforts to enhance transparency and combat financial crimes, the Corporate Transparency Act (CTA) created new beneficial ownership reporting requirements that will come into effect in 2024. These new reporting requirements will be administered by Financial Crimes Enforcement Network (FinCEN) and aim to shed light on the individuals who exercise substantial control over reporting companies or own significant ownership interests. However, it’s important to note that there are certain entities that are exempt from these reporting obligations. In this article, we will present a brief overview of BOI reporting exemptions from that are currently provided.

Background

Before assessing if your entity is exempt from reporting, you first need to understand if the entity is subject generally to the reporting requirements. Specifically if your entity is domestic, the entity may be a domestic reporting company if it was created by the filing of a document with a secretary of state or similar office of a jurisdiction within the United States. A foreign reporting company would be any entity created under the law of a foreign jurisdiction that is registered to do business in the United States.

By way of example, essentially all corporations and limited liability companies are subject to the reporting requirements generally, but a trust that is formed by a trust agreement that is not filed with a secretary of state may potentially not be subject to reporting.

Understanding BOI Reporting Exemptions

If you have determined that you are dealing with a domestic or foreign reporting company, the Corporate Transparency Act provides exemptions for 23 types of entities from the beneficial ownership information reporting requirement. These exemptions are designed to avoid duplicative reporting and account for entities that are already regulated by federal and/or state governments. These exemptions include:

1. Securities Reporting Issuers

   Securities issuer registered under the Securities Exchange Act of 1934, or required to file supplementary and periodic reporting requirements under the Act.

2. U.S. Governmental Authorities

   Entities that are established under the laws of the U.S., an Indian tribe, a State, or a political subdivision of a State, or under an interstate compact between two or more States, and they exercise authority on behalf of the U.S. or an Indian tribe, State, or political subdivision.

3. Banks

   Banks are defined in Sec. 3 the Federal Deposit Insurance Act, Sec. 2(a) the Investment Company Act of 1940, or Sec. 202(a) of the Investment Advisor’s Act of 1940.

4. Credit Unions

   Any Federal or State credit union defined in Sec. 101 of the Federal Credit Union Act.

5. Depository Institution Holding

   Any bank holding company defined in Sec. 2 of the Bank Holding Company Act of 1956. Also, any savings and loan holding companies defined in Sec. 10(a) of the Home Owners’ Loan Act.

6. Money Services Businesses

   Businesses registered with FinCEN under 31 U.S.C. 5330 and 31 CFR 1022.380 as money services or transmitting businesses.

7. Broker or Dealer in Securities

   Broker and dealers are defined in Sec. 3 of the Securities Exchange Act of 1934 and registered under Sec. 15.

8. Securities Exchange or Clearing Agency

   Exchange and clearing agencies are defined in Sec. 3 of the Securities Exchange Act of 1934 and registered under Sec. 6 or 17A (See link in #7, Broker or Dealer in Securities).

9. Other Exchange Act Registered Entities

   Other entities not included in 1, 7, or 8 above, that are registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (See link in #7, Broker or Dealer in Securities).

10. Investment Companies or Advisers

    Any investment company defined in Sec. 3 of the Investment Company Act of 1940 or advisors defined in Sec. 202 of the Investment Adviser’s Act of 1940, and registered with the Securities and Exchange Commission.

11. Venture Capital Fund Advisors

    Advisors that are described in Sec. 203(l) of the Investment Advisors Act of 1940 and has filed Item 10, Sch. A, and Sch. B of Part 1A of Form ADV with the Securities and Exchange Commission.

12. Insurance Companies

    Companies defined in Sec. 2 of the Investment Company Act of 1940.

13. State-licensed Insurance Producers

    Any entity that is under supervision by the insurance commissioner authorized by a State and has a physical operating presence in the U.S.

14. Commodity Exchange Act Registered Entities

    Registered entities under Sec. 1(a) of the Commodity Exchange Act, and those registered with the Commodity Futures Trading Commission.

15. Accounting Firms

    Any public accounting firm registered under Sec. 102 of the Sarbanes-Oxley Act of 2002.

16. Public Utilities

    Any regulated public utility that provides telecommunications services, electrical power, natural gas, or water and sewer services within the U.S.

17. Financial Market Utilities

    Utilities defined by the Financial Stability Oversight Council under Sec. 804 of the Payment, Clearing, and Settlement Supervision Act of 2010

18. Pooled Investment Vehicles

    All pooled investment vehicles operated or advised by a person described in 3, 4, 7, 10, or 11 above.

19. Tax-Exempt Entities

    In general, any entity that is described in Sec. 501(c) of the Internal Revenue Code that are exempt from U.S. tax, political organizations, trusts under Sec. 4947(a) of the Code.

20. Entities Assisting a Tax-Exempt Entity

    Defined as those who provide financial assistance to entities described in 19 above, is a U.S. person, is beneficially owned or controlled by exclusively one or more U.S. citizens, and receives the majority of its funding from those U.S. persons.

21. Large Operating Companies

    Companies that employ more than 20 full-time employees in the U.S., have a physical operating presence in the U.S., and have gross receipts totaling more than $5,000,000 reported on the preceding year Federal income tax return.

22. Subsidiaries of Certain Exempt Entities

    Any entity whose ownership interests are controlled or wholly owned, directly or indirectly, by one or more entities described 1-17, 19, or 21 described above.

23. Inactive Entities

    Companies in existence on or before January 1, 2020 and are not engaged in active business, not owned by foreign persons, and has no assets. Also, they must not have had any change in ownership or receive funds in an amount greater than $1,000 in the prior calendar or fiscal year.

Do You Need to File?

Assessing if a beneficial ownership report is necessary first requires you to assess if the entity is a domestic or foreign reporting company, which generally is (A) an entity created by filing of a document with a Secretary of State or (B) created under the laws of a foreign country and registered in the U.S.

If you meet this first requirement as a domestic or foreign reporting company, you next need to assess if any of these 23 Corporate Transparency Act exemptions apply. If no exemptions apply, you should be prepared to report beneficial ownership and control in 2024 under these new rules.

If you are unsure if your company is subject to these new filing requirements, we recommend consulting with your advisors for a thorough assessment.

Get in Touch

Table of Contents