Article
Corporate transparency act reporting for not-for-profits
March 17, 2024 · Authored by Patty Mayer
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Article
March 17, 2024 · Authored by Patty Mayer
The Corporate Transparency Act (CTA) was enacted by Congress in 2021 as part of the National Defense Authorization Act. It provides transparency into business entity structures with the goal of combatting money laundering, corruption, and other illicit activities that can be committed anonymously through corporate structures.
The CTA went into effect Jan. 1, 2024.
The CTA includes reporting requirements for beneficial ownership information (BOI) for individuals who own 25% or more of a company or who exercise substantial control over the entity.
Companies subject to the requirements must file an initial report with the Financial Crimes Enforcement Network (FinCEN) according to timelines outlined below and must report any changes to a previously filed report within 30 days of the change.
Domestic and foreign entities that have filed formation or registration documents with a U.S. state or Tribe are subject to the reporting requirements unless they meet one of the exceptions outlined by FinCEN.
Per their Frequently Asked Questions (FAQs), not-for-profit organizations are exempt from the new reporting requirement for:
Although the new exemption rules are favorable for the not-for-profit sector, organizations should know when they’re subject to the reporting requirements, such as the following.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.
The organization must submit the required report within 180 days.
There are three date-based results for this scenario:
The entity must file an updated corrected report when exemption or reinstatement is received. Check the box for newly exempt entity and identify your organization.
Beneficial owners who hold their ownership interest in the reporting company through multiple exempt entities may be subject to special rules. For instance, if the beneficial owner owns or controls their ownership interests in a reporting company exclusively through multiple exempt entities, then the names of all exempt entities may be reported instead of the individual beneficial owner’s information.
For a full list of exceptions, see the Financial Crimes Enforcement Network (FinCEN) BOI Reporting Frequently asked questions page, question C.2; there are 23 exemptions in all. Additional details are provided in the FinCEN’s Small Entity Compliance Guide.
Failure to comply with the BOI reporting requirements or missing filing deadlines can result in criminal or civil penalties. There’s a $500 per day penalty, up to $10,000, and up to two years of jail time for the failure to timely file initial or updated reports.
Once an initial report is filed, any changes to previously reported information must be filed within 30 days of the change.
Reach out to your legal counsel if you have questions regarding the CTA or need help meeting your reporting obligations with FinCEN.
