As the initial deadline approaches for millions of entities to file their initial beneficial ownership information reports (BOIRs) under the Corporate Transparency Act (CTA), the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) continues to release key guidance. In July FinCEN released essential guidance addressing outstanding questions regarding dissolved and disregarded entities.
We’ve broken down FinCEN’s most recent FAQs for you here:
Dissolution and the CTA: Think dissolving your entity eliminates your reporting obligations? Think again.
On July 8, 2024, FinCEN released additional FAQs regarding beneficial ownership reporting requirements of dissolved entities. This new guidance notes that dissolving a reporting company prior to the date its initial BOIR is due does not absolve the entity of reporting obligations.
While an entity is not required to file a BOIR if it was formally and irrevocably dissolved prior to January 1, 2024, a reporting company in existence on January 1, 2024 must file a BOIR even if it is formally dissolved prior to the filing deadline of January 1, 2025.
Likewise, a reporting company formed or registered on or after January 1, 2024, but dissolved prior to the date its initial BOIR is due, must file a BOIR within the applicable timeframe (90 days from creation or registration for reporting companies formed or registered during 2024, and 30 days from creation or registration for reporting companies formed or registered on or after January 1, 2025). Not only that, FinCEN advises that if a reporting company was “administratively dissolved or suspended,” it does not necessarily cease to exist as a legal entity unless the dissolution or suspension has become permanent.
To summarize, if the reporting company ceased to exist in 2024, there is still a filing obligation, and dissolving ahead of the deadline does not relieve the company of that obligation.
The impact? FinCEN’s guidance extends reporting obligations to entities that may have previously been thought to be outside the CTA’s scope. While the guidance clarifies important filing obligation questions, it raises others. Reporting companies must report beneficial owners at the time the BOIR is filed. But who owns a dissolved entity or has substantial control and who holds the responsibility for submitting the BOIR? Perhaps additional guidance will be forthcoming to address these outstanding questions.
Do disregarded entities need to obtain tax identification numbers (TINs)?
Prior to FinCEN’s July 24th FAQs, there was uncertainty about whether disregarded entities would be required to obtain a tax identification number (TIN) solely for reporting beneficial ownership information (BOI) to FinCEN. FinCEN’s latest guidance clarifies the type of TIN that should be reported by a reporting company that is disregarded for U.S. tax purposes:
- If the disregarded entity has its own EIN, it may report that EIN as its TIN.
- If the disregarded entity does not have an EIN, it is not required to obtain one to meet its BOIR reporting requirements so long as it can instead provide another type of TIN (or an equivalent foreign tax identification number and name of that foreign tax jurisdiction):
- If the disregarded entity is a single-member LLC or otherwise has only one owner that is an individual with an SSN or ITIN, the disregarded entity may report that individual’s SSN or ITIN as its TIN.
- If the disregarded entity is owned by a U.S. entity that has an EIN, the disregarded entity may report that other entity’s EIN as its TIN.
- If the disregarded entity is owned by another disregarded entity or a chain of disregarded entities, the disregarded entity may report the TIN of the first owner up the chain of disregarded entities that has a TIN as its TIN.
These guidelines provide for compliance with BOI reporting requirements while aligning with IRS rules regarding TIN usage.
As evident from the above, the CTA landscape continues to evolve. When it comes to navigating the intricacies of BOIR reporting, CSC has you covered. We’ve been handling similar beneficial owner filings abroad for years and we’ve brought that expertise and experience to our domestic offering. CSC is your trusted partner, bringing unmatched expertise to close the knowledge gap, ensuring that you and your clients have the support you need.
Our team of CTA experts stands ready to answer questions and assist with your BOI reports. Register for our upcoming September 5 Corporate Transparency Act webinar and visit our CTA resource page for more information on how we can help.
