New Federal Law Kicks In- Requires New Reports

By Raul Rivera

In 2021, Congress passed the Corporate Transparency Act (CTA). The new law took effect January 1^st, 2024. It requires most companies to submit a beneficial ownership information report. The purported aim behind this new requirement is to make it more challenging for nefarious actors to conceal or profit from illicit gains through shell companies or other non-transparent ownership structures.

Churches and Ministries are Exempt

The first thing you need to know is that 501(c)(3) organizations are exempt from having to file the beneficial ownership information report.This includes the following:

1. Churches and ministries that have 501(c)(3) status
2. Churches and ministries that have not filed for 501(c)(3) status are also exempt.
3. If a church owns a for-profit business, that for-profit business is also exempted.*
4. If the church has a non-profit LLC subsidiary, that LLC is also exempt.

Pastors and Leaders who Own Businesses

Many pastors and leaders own for-profit businesses.  The new law requires those businesses to file the report unless the company qualifies as a large operating company.

For an entity to qualify as a “large operating company,” it must meet the following criteria:

1. Employs 20 or more full-time employees in the United States.
2. Has an operating presence at a physical address within the United States.
3. Filed a federal income tax or information return in the United States for the previous year demonstrating more than $5M in gross receipts or sales. This excludes gross receipts or sales from sources outside the United States.

There are Deadlines for Companies to Report

For companies established or registered before January 1, 2024, the deadline to file the initial ownership information report with FinCEN is January 1, 2025.

For companies formed or registered between January 1, 2024, and January 1, 2025, the deadline is 90 calendar days after forming. This is based on the date you filed papers with the state.

For companies formed or registered from January 1, 2025, onwards, the deadline is 30 days after filing papers with the state.

Information to Report

The information to be reported includes the company's:

1. Legal and trade names,
2. The address of its principal place of business,
3. Its jurisdiction of formation or registration, and
4. Its Taxpayer Identification Number.
5. Each beneficial owner's details, including:

1. Name,
2. Date of birth,
3. Residential address, and
4. An identifying number from an accepted identification document, such as a non-expired U.S. driver's license, state or local government ID, U.S. passport.

Not an Annual Report

There is no annual reporting requirement, but any changes to the reported information about the company or its beneficial owners necessitate an updated report within 30 days of the change. This can get a little burdensome if you move and your personal address changes or the company changes its name, as shown below.

Examples of Changes Requiring an Update

Examples of changes requiring an updated report include;

1. Changing the business's name or
2. a change in beneficial owners, such as a new CEO or
3. a sale, altering ownership interest.
4. Changes to a beneficial owner’s address and/or identifying information require a new report, including an image of the updated identification document.

Failure to report or update beneficial ownership information timely may result in civil and criminal penalties.

Filing the Report

Reporting can be done electronically through FinCEN’s secure filing system. You are allowed to use third-party service providers to assist with submitting the required information, and there is no obligation to engage an attorney or CPA for this process. However, they may be consulted if needed. You can file at https://www.fincen.gov/boi.

Remembering to Update

Thankfully, for now, churches and ministries do not have to file.  However, if that changes, we will keep you informed. Reporting is not very difficult for pastors and leaders who own their businesses. The part that I think will be difficult is to remember to update the information on the report every time the business or one’s personal information changes.

If you have questions or need assistance? Please call us at 770-638-3444 to speak with our compliance experts.

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*This could change. Please make sure that you verify.  We will update this post if it changes.

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