On November 16, the Financial Crimes Enforcement Network (“FinCEN”) issued – again –expanded FAQs pertaining to beneficial ownership information (“BOI”) reportable under the Corporate Transparency Act (“CTA”).  These expanded FAQs enlarge upon the previously expanded FAQs set forth by FinCEN in September. 

The expanded FAQs cannot and do not expand upon the statutory and regulatory obligations already established by the CTA.    In that sense, they do not add any additional insight, but rather repeat the rules already set by statute and regulation.  With that in mind, we set forth below the new FAQs, some of which have particular relevance to attorneys and other so-called gatekeepers.

The CTA is scheduled to become effective on January 1, 2024.  In the short time between now and then, FinCEN still must promulgate final regulations regarding access to the BOI database and propose regulations on the alignment  between the CTA and the Customer Due Diligence (“CDD”) Rule applicable to banks.  The time frame in which FinCEN must act is shrinking quickly.

B. 7. Is a reporting company required to use an attorney or a certified public accountant (CPA) to submit beneficial ownership information to FinCEN?

No. FinCEN expects that many, if not most, reporting companies will be able to submit their beneficial ownership information to FinCEN on their own using the guidance FinCEN has issued. Reporting companies that need help meeting their reporting obligations can consult with professional service providers such as lawyers or accountants.

C. 3. Are certain corporate entities, such as statutory trusts, business trusts, or foundations, reporting companies?

It depends. A domestic entity such as a statutory trust, business trust, or foundation is a reporting company only if it was created by the filing of a document with a secretary of state or similar office. Likewise, a foreign entity is a reporting company only if it filed a document with a secretary of state or a similar office to register to do business in the United States.

State laws vary on whether certain entity types, such as trusts, require the filing of a document with the secretary of state or similar office to be created or registered.

If a trust is created in a U.S. jurisdiction that requires such filing, then it is a reporting company, unless an exemption applies.

Similarly, not all states require foreign entities to register by filing a document with a secretary of state or a similar office to do business in the state.

However, if a foreign entity has to file a document with a secretary of state or a similar office to register to do business in a state, and does so, it is a reporting company, unless an exemption applies.

Entities should also consider if any exemptions to the reporting requirements apply to them. For example, a foundation may not be required to report beneficial ownership information to FinCEN if the foundation qualifies for the tax-exempt entity exemption.

C. 4. Is a trust considered a reporting company if it registers with a court of law for the purpose of establishing the court’s jurisdiction over any disputes involving the trust?

No. The registration of a trust with a court of law merely to establish the court’s jurisdiction over any disputes involving the trust does not make the trust a reporting company.

D. 6. Is my accountant or lawyer considered a beneficial owner?

Accountants and lawyers generally do not qualify as beneficial owners, but that may depend on the work being performed.

Accountants and lawyers who provide general accounting or legal services are not considered beneficial owners because ordinary, arms-length advisory or other third-party professional services to a reporting company are not considered to be “substantial control” (see Question D.2). In addition, a lawyer or accountant who is designated as an agent of the reporting company may qualify for the “nominee, intermediary, custodian, or agent” exception from the beneficial owner definition.

However, an individual who holds the position of general counsel in a reporting company is a “senior officer” of that company and is therefore a beneficial owner.

D. 10. Is a reporting company’s designated “partnership representative” or “tax matters partner” a beneficial owner?

It depends. A reporting company’s “partnership representative,” as defined in 26 U.S.C. 6223, or “tax matters partner,” as the term was previously defined in now-repealed 26 U.S.C. 6231(a)(7), is not automatically a beneficial owner of the reporting company. However, such an individual may qualify as a beneficial owner of the reporting company if the individual exercises substantial control over the reporting company, or owns or controls at least 25 percent of the company’s ownership interests.

Note that a “partnership representative” or “tax matters partner” serving in the role of a designated agent of the reporting company may qualify for the “nominee, intermediary, custodian, or agent” exception from the beneficial owner definition.

E. 4. Can a company applicant be removed from a BOI report if the company applicant no longer has a relationship with the reporting company?

No. A company applicant may not be removed from a BOI report even if the company applicant no longer has a relationship with the reporting company. A reporting company created on or after January 1, 2024, is required to report company applicant information in its initial BOI report, but is not required to file an updated BOI report if information about a company applicant changes.

F. 6. Is there a requirement to annually report beneficial ownership information?

No. There is no annual reporting requirement. Reporting companies must file an initial BOI report and updated or corrected BOI reports as needed.

G. 3. How can I obtain a Taxpayer Identification Number (TIN) for a new company within 30 days so that I can file an initial beneficial ownership information report on time?

The Internal Revenue Service (IRS) offers a free online application for an Employer Identification Number (EIN), a type of TIN, which is provided immediately upon submission of the application. For more information on TINs, see “Taxpayer Identification Numbers (TIN)” on the IRS.gov website. For more information on Employer Identification Numbers and to access the EIN online application, see “Apply for an Employer Identification Number (EIN) Online” on the IRS.gov website.

A paper filing is required if a foreign person that does not have an Individual Taxpayer Identification Number (ITIN) applies for an EIN. According to the IRS, receiving an EIN through this process could take six to eight weeks. If you are a foreign person that may need to obtain an EIN for a reporting company, we recommend applying early for an ITIN. Foreign reporting companies that are not subject to U.S. corporate income tax may report a foreign tax identification number and the name of the relevant jurisdiction instead of an EIN or TIN.

G. 4. Should an initial BOI report include historical beneficial owners of a reporting company, or only beneficial owners as of the time of filing?

An initial BOI report should only include the beneficial owners as of the time of the filing. Reporting companies should notify FinCEN of changes to beneficial owners and related BOI through updated reports.

L. 4. If I own a group of related companies, can I consolidate employees across those companies to meet the criteria of a large operating company exemption from the reporting company definition?

No. The large operating company exemption requires that the entity itself employ more than 20 full-time employees in the United States and does not permit consolidation of this employee count across multiple entities.

L. 5. How does a company report to FinCEN that the company is exempt?

A company does not need to report to FinCEN that it is exempt from the BOI reporting requirements if it has always been exempt.

If a company filed a BOI report and later qualifies for an exemption, that company should file an updated BOI report to indicate that it is newly exempt from the reporting requirements. Updated BOI reports are filed electronically though the secure filing system. An updated BOI report for a newly exempt entity will only require that the entity: (1) identify itself; and (2) check a box noting its newly exempt status.

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