On January 8, 2024, Treasury Secretary Janet Yellen visited the Financial Crimes Enforcement Network (FinCEN) in Vienna, Virginia.
Valerie Plesch/Bloomberg via Getty Images
Small businesses and their owners could face fines of $10,000 or more if they don’t comply with the U.S. Treasury Department’s new reporting requirements by the end of the year, and there’s evidence that many businesses haven’t complied yet.
The Corporate Transparency Act of 2021 imposes this requirement. law Target Curbing illicit finance by requiring reporting by many businesses operating in the United States beneficial ownership information Treasury Department’s Financial Crimes Enforcement Network (also known as FinCEN).
The deadline for many businesses to submit an initial BOI report is January 1, 2025.
This applies to approximately 32.6 million businesses, including certain corporations, LLCs and Othersaccording to the federal estimate.
The U.S. Treasury Department did not respond to CNBC’s request for comment on the number of BOI reports submitted so far.
The data helps identify people who directly or indirectly own or control a company, making it “more difficult for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.” according to to FinCEN.
U.S. Treasury Secretary Janet Yellen said in a statement in January that “corporate anonymity facilitates money laundering, drug trafficking, terrorism and corruption.” announcement BOI portal launched.
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Here’s the key: Businesses and owners who didn’t file may face According to FinCEN, civil penalties of up to $591 per day can be imposed if the violation continues for one day. (This amount is adjusted for inflation.) In addition, they could face criminal fines of up to $10,000 and up to two years in prison.
“For a small business, all of a sudden you’re faced with things that could destroy you,” said Charlie Fitzgerald III, a certified financial planner in Orlando, Fla., and a founding member of Moisand Fitzgerald Tamayo. fines for companies.
The federal government had received about 9.5 million applications as of Dec. 1, according to statistics provided by FinCEN to the office of Rep. French Hill, R-Ark., who has called for repeal of the Corporate Transparency Act. Hill’s office shared the data with CNBC.
This number represents approximately 30% of the estimated total.
As of early December, FinCEN was receiving about 1 million new reports each week, Hill’s office said.
Many merchants may not know
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A “beneficial owner” is a person who owns at least 25% of the ownership interest in a company or has “substantial control” of the entity.
Businesses must Report information Information about its beneficial owners, such as name, date of birth, address and information from identification documents such as a driving license or passport and other data.
Companies that existed before 2024 must report by January 1, 2025. Those created in 2025 or later have 30 days.
Corporate anonymity facilitates money laundering, drug trafficking, terrorism and corruption.
Janet Yellen
U.S. Treasury Secretary
There are multiple Exceptions For example, businesses with more than $5 million in sales and more than 20 full-time employees may not need to file reports.
Many tax-exempt businesses—such as large corporations, banks, credit unions, tax-exempt entities, and public utilities— Already provided Similar data.
Brian Nelson, the U.S. Treasury undersecretary for terrorism and financial intelligence, said in an interview at the Hudson Institute earlier this year that the agency was doing “full coverage” to raise awareness of the issue. BOI Registryopening on January 1, 2024.
But it seems that many business owners either fail to comply or are unaware of this requirement, despite Outreach work.
Business trade group S-Corporation Association of America says state compliance scope ‘bleak’ explain Early October.
The report said the “vast majority” of businesses have yet to file reports, “which means that by early 2025, millions of small business owners and their employees will become de facto felons.”
Enforcement remains unresolved
Bevan Goldswin | Electronic+ | Getty Images
Others, however, say the situation is not that dire.
For example, a federal court in Texas on December 3 temporarily blocked the Treasury Department from enforcing the BOI reporting rule, meaning the agency cannot impose penalties while the court conducts a more thorough review of the rule’s constitutionality.
“Companies should still submit information,” said Erica Hanichak, director of government affairs at the Alliance for Financial Responsibility and Corporate Transparency. “The deadline itself doesn’t change. It just changes the enforcement of the law.”
The government is expected to appeal and enforcement “may resume” if the ban is lifted, wrote Attorney at Fredrikson Law Firm.
In addition, the Ministry of Finance stated that it will only impose penalties on “individuals (or companies) who commit the following acts”intentional violation“BOI report.
Hanichak said the agency was not trying to “enforce a trap.”
“FinCEN is aware that this is a new requirement,” it said in a FAQ. “You may avoid penalties if you correct errors or omissions within 90 days of the original reporting deadline. However, if you ignore your beneficial ownership information reporting obligations, you may face civil and criminal penalties.”
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