By Martha Waggoner, for Journal of Accountancy
The AICPA and over 50 affiliated organizations recommended in a letter to Treasury's Financial Crimes Enforcement Network (FinCEN) that the agency extend the effective date for the beneficial ownership information (BOI) reporting requirement by one year to give the millions of affected businesses time to learn about the new and complex rules. The letter asked that the scope of the one-year deadline delay include not only new entities created in 2024, but all entities created thereafter and all entities making updates or corrections to their original filings.
The Idaho Society of CPAs added their name to the letter to FinCen.
"FinCEN should give all businesses a fair time frame to gain awareness and a reasonable time frame to comply with BOI requirements," said the letter, dated Oct. 30 and signed by Sue Coffey, CPA, CGMA, the AICPA's CEO–Public Accounting.
Co-signers include CPA societies or associations in the 50 states, Washington, D.C., Guam, and the Virgin Islands.
Effective Jan. 1, 2024, existing companies and companies created or registered before that date, will have one year to file their BOI reports. FinCEN has proposed to extend the filing deadline for entities created or registered during 2024 to 90 days from the earlier of the date on which the company receives actual notice that its creation or registration has become effective or the date on which the secretary of state first provides public notice that the company has been created or registered, instead of the previous 30-day deadline.
That change does not go far enough, the letter said, especially considering the steep civil and criminal penalties that can be assessed if authorities determine that a business is willfully not complying with the BOI reporting requirements. Civil penalties are assessed at $500 per day, up to a total of $10,000, for as long as the violation continues, and criminal penalties could include up to two years of prison time.
"To have a meaningful impact on small businesses, we recommend that FinCEN extend the deadline beyond the proposed 90 days to one year," the letter said. "Additionally, the scope of the proposed rulemaking should be expanded to include not only new entities created in 2024 but all entities created thereafter and entities making updates or corrections to their original filings."
The BOI reporting requirement is an anti-money laundering initiative enacted through the Corporate Transparency Act, P.L. 116-283, in 2021, mandating that BOI be reported to FinCEN. The requirement would apply to most companies, with FinCEN estimating about 32.6 million filings in the first year of BOI implementation.
FinCEN also estimates that during the first year of filing about 32.6 million BOI reports will be filed, and about 5 million initial reports will be filed annually after that.
The BOI reporting requirement requires businesses to identify beneficial owners and company applicants and to provide information about both the company and the owners, including full legal name, address, state or tribal jurisdiction of formation, IRS taxpayer identification number, birthdate, and other details.
Most businesses are unaware of the BOI reporting rules, the letter said, citing a survey by the National Federation of Businesses that showed 90% of its members were not at all familiar with them.
FinCEN has made some efforts to inform businesses. In September, it published a Small Entity Compliance Guide. FinCEN also is reaching out to state, local, and tribal governments and state financial institution supervisors, FinCEN director Andrea Gacki said in October.
FinCEN recently updated its FAQs on BOI reporting requirements, including answers to questions such as, "Is a member of a reporting company's board of directors always a beneficial owner of the reporting company?" and "Can a parent company file a single BOI report on behalf of its group of companies?"
FinCEN has said it would open a contact center dedicated to BOI.
Its efforts have fallen short, the AICPA letter said: "Regardless of FinCEN's activities to raise awareness, their efforts remain ineffective, and most businesses are unaware of this filing requirement."
In addition, FinCEN has "woefully underestimated" the burden hours for entities to complete the filing in the first year. The estimate of over 32.8 million burden hours with an estimated cost of up to $2,614.87 per entity, depending on their structure, "does not account for the added stress associated with requiring a monthly tracking of all business owner's information to anticipate when changes could or have occurred," the letter said.
Something as small as an expired driver's license is a reportable change that usually requires business owners to undertake many activities, the letter said.
"If FinCEN extended the filing deadline to one year and expanded the applicability of the deadline to include not only new entities created in 2024, but all entities created thereafter as well as all entities making updates or corrections to their original filings, FinCEN would create the necessary transparency for all businesses to feel certain about meeting their filing requirements," the letter said.
— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.