FinCEN Compliance – Summer 2023 BE-12 Reporting and Beneficial Ownership Reporting beginning 2024

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Every five years, the Bureau of Economic Analysis (BEA) conducts its Benchmark Survey of Foreign Direct Investments within the U.S., otherwise known as the BE-12 Report. The upcoming BE-12 report is due May 31, 2023 (or June 30, 2023 for e-file). This report is required for each U.S. business where a foreign person owns or controls, directly or indirectly, 10% or greater interest in the voting stock of the company. This report is also required where foreign persons own U.S. real property, even if it is not owned via a US business.

While the report itself is required every five years, the upcoming report that is due will only cover the fiscal years ending 2022. Those required to file the annual BE-15 Survey will instead file the BE-12 for fiscal year ending 2022.

**NEW FinCEN Beneficial Ownership Information Report (“BOI”) for 2024

On September 29, 2022, FinCEN issued a final rule implementing additional reporting requirements with respect to a U.S. company’s ownership, through the filing of the Beneficial Ownership Information Report (“BOI”). The proposed framework for this reporting was originally issued through the Corporate Transparency Act of January 1, 2021.

Similar to the other reporting of foreign investments required under FinCEN, the goal is to protect the U.S. financial system from illicit or criminal use by providing financial information of foreign investment to governmental agencies and officials.

Who Must File

Any entity that meets the definition of a ‘reporting company’ under the current FinCEN guidance must file a BOI report. The guidance clarifies that a reporting company is:

• A domestic company, such as a corporation, limited liability company or other entity that is established by filing a document with the secretary of state or other similar office in the state.
• A foreign company, such as a corporation, limited liability company or other entity that is formed under the laws of a foreign jurisdiction and is registered to do business in the U.S. by filing a document with the secretary of state or equivalent.

While the definition is seemingly all encompassing of entities who do business in the U.S., there are 23 specific exemptions provided to this definition that should narrow the pool of who is required to file. The most notable of the exemptions that exist are as follows:

• Large operating companies that employ 20+ full-time employees in the U.S., filed a U.S. federal income tax return that demonstrated more than $5 million in gross receipts or aggregate sales, and that have a physical office within the U.S.
• Investment companies and investment advisors registered with the SEC
• Tax exempt entities such as:
  • Nonprofits defined under §501(c)
  • Political organizations under §527(e)(1)
  • Trusts defined under §4947(a)
• Inactive entities that were in existence before January 1, 2020

Penalties for non-filing or reporting violations are considered civil penalties assessed by FinCEN, up to $500 for each day the violation continues as of the date of issue and may lead to fines up to $10,000 and potential imprisonment for up to two years for a criminal violation.

When to File

The BOI reporting will go into effect on January 1, 2024. Due dates for BOI Reports are as follows:

• The initial BOI reports for reporting companies that exist as of December 31, 2023 will be one year from the effective date.
• For reporting companies that are formed after the effective date, their initial report is due 30 days from formation.
• For reporting companies that no longer meet exemptions from filing (discussed above), their initial report is due 30 days from the date they no longer qualify for an exemption.
• If there are updates to the required information on the BOI report, or if information was originally incorrectly provided, companies have 30 days from the day they determine this change to file their updated report.

Information to be Provided

The BOI report requires reporting companies to disclose the following:

• Company basic information such as legal name, address, jurisdiction of formation and a unique tax ID or FinCEN identifier
• Beneficial owner’s basic information such as legal name, date of birth and address. An image of the owner’s acceptable identification document must also be provided to FinCEN (such as their passport, state driver’s license, etc.).
  • A beneficial owner is defined as an individual who directly or indirectly either 1) exercises substantial control over the reporting company or 2) owns/controls at least 25% of the ownership interests of the reporting company.
    • Substantial control correlates to an individual who as the authority to appoint or remove officers of the company or has substantial influence over the decision making of the company.

Learn More

If you have any questions on the above with respect to either the required 2023 BE-12 Report or the future BOI reporting required beginning 2024, please reach out to the Bennett Thrasher international tax group for assistance by calling 770.396.2200.

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