Corporate Transparency Act Beneficial Ownership Information Reporting is now open to business entities formed in U.S.

Who Doesn’t Report BOI? FinCEN BOIR Exemptions Explained.

Nearly every business in the U.S. needs to file a Beneficial Ownership Information (BOI) Report with FinCEN. But did you know that certain types of companies are exempt from this requirement? Yes, FinCEN provides exemptions under the Corporate Transparency Act that might apply to your business.

Here we dive into FinCEN’s 23 exemption categories for BOI Reporting. Businesses that meet all of the criteria for one of these categories may not need to file BOI Reports. We break down these exemptions and help you understand if and how they apply to your business.

What are FinCEN’s BOI Reporting Exemptions?

The Corporate Transparency Act (CTA) is a federal law that puts FinCEN in charge of creating the regulations for Beneficial Ownership Information Reporting (BOIR). FinCEN’s rules for BOIR exempt certain types of businesses from needing to complete the reporting requirements. 

FinCEN’s BOIR exemptions mostly apply to businesses that are either sufficiently large or operate in highly regulated sectors. Exempt companies include banks, insurance companies, and types of financial service companies. Due to their size and the nature of their business, these entities are less likely to be involved in illegal activities, and are often already regulated by a government agency.

Businesses qualifying for these exemptions are not required to submit initial reports to FinCEN. Additionally, exempt companies are not obligated to keep their Beneficial Ownership Information updated.

Which Businesses are Exempt from Filing BOIR?

FinCEN’s rules specifically exempt 23 types of businesses from having to file Beneficial Ownership Information reports. An entity needs to meet all of the criteria for one of the following categories to qualify for an exemption: 

Exemption #1. Securities Reporting Issuers

Securities issuers registered with the SEC under Section 12 of the Securities Exchange Act are exempt from BOI Reporting. This exemption also applies to entities obligated to file information under Section 15(d) of the Securities Exchange Act.

Exemption #2. Government Authorities 

State, Local, or Federal government authorities do not have to file Beneficial Ownership Information Reports. 

Exemption #3. Banks

Nationally-chartered banks and their wholly owned subsidiaries are exempt from filing BOI. These entities are governed by either the Federal Deposit Insurance Act, Investment Company Act, or Investment Advisers Act. 

Exemption #4. Credit Unions

Federal and State credit unions, as defined in the Federal Credit Union Act, are exempt and not required to file Beneficial Ownership Information Reports. 

Exemption #5. Depository Institution Holding Companies

“Bank holding companies” as outlined in the 1956 Bank Holding Company Act, and “savings and loan holding companies” specified in the Home Owners’ Loan Act, are not required to file Beneficial Ownership Information reports. 

Exemption #6. Money Service Businesses 

Money transmitting and money services businesses do not have to meet the BOI reporting requirements. These businesses are already required to register with FinCEN under 31 U.S. Code § 5330 and 31 CFR 1022.380.

Exemption #7. Securities Brokers or Dealers

Brokers or dealers registered with the SEC are exempt from filing Beneficial Ownership Information Reports.

Exemption #8. Securities Exchange or Clearing Agencies 

Registered securities exchanges or clearing agencies with the SEC do not have to comply with FinCEN BOI Reporting requirements.

Exemption #9. Other Securities Exchange Act Registered Entities

Businesses that are registered with the SEC under the Securities Exchange Act are not required to file BOI Reports.

Exemption #10. Investment Company or Investment Advisers

Investment companies or investment advisers registered with the SEC are exempt from needing to file Beneficial Ownership Information Reports with FinCEN.

Exemption #11. Venture Capital Fund Advisers

Investment advisers and venture capital funds covered by the 1940 Investment Advisers Act don’t need to file reports on Beneficial Ownership Information. However, they are required to submit Form ADV Item 10, along with Schedule A and Schedule B of Part 1A, to the Securities and Exchange Commission in order to be exempt.

Exemption #12. Insurance Companies

Insurance companies as defined in the 1940 Investment Company Act are not required to file Beneficial Ownership Information reports with FinCEN.

Exemption #13. State-Licensed Insurance Providers

Entities recognized by a State as insurance producers and overseen by the state insurance commissioner or a similar agency do not need to file BOI reports.

FinCEN requires insurance producers to have an operational presence at a physical office in the U.S. The company needs to conduct regular business activities at a physical location in the U.S. that the entity either owns or leases.

Exemption #14. Commodity Exchange Act Registered Entities

Entities registered with the Commodity Futures Trading Commission (CFTC) are exempt from needing to file Beneficial Ownership Information reports. This exemption covers entities identified under the Commodity Exchange Act, including futures commission merchants, introducing brokers, swap dealers, major swap participants, commodity pool operators, commodity trading advisors, and retail foreign exchange dealers.

Exemption #15. Accounting Firms

Public accounting firms regulated by the Sarbanes-Oxley Act are not required to file Beneficial Ownership Information reports.

Exemption #16. Public Utilities

Regulated public utilities, including telecommunications, electrical power, natural gas, or water services, are exempt from FinCEN’s reporting rules.

Exemption #17. Financial Market Utilities

Financial market utilities registered by the Financial Stability Oversight Council under the Payment, Clearing, and Settlement Supervision Act do not file Beneficial Ownership Information reports.

Exemption #18. Pooled Investment Vehicles

Pooled investment vehicles and other entities operated by a bank, credit union, investment company, venture capital fund adviser, or broker-dealer are exempt from having to file Beneficial Ownership Information reports with FinCEN.

Exemption #19. Tax-Exempt Entities

Entities that have a federal tax exemption status are exempt from FinCEN’s reporting requirements. This includes entities exempt under Internal Revenue Code sections, 501(c), 501(a), 508(a), 527(e)(1), 527(a) or 4947(a).

Exemption #20. Entities Assisting Tax-Exempt Entities

Other entities that support a tax-exempt entity in one of the following ways can be exempt from filing BOI reports:

a.) The entity’s only operation is to support a tax-exempt entity, either through financial aid or by holding governance rights,

b.) The entity is owned by real persons who are either U.S. citizens or permanent residents,

c.) A majority of the entity’s funding or revenue comes from one or more U.S. persons who are either citizens or permanent residents, or

d.) The entity is legally established and is considered a U.S. person as defined in the Internal Revenue Code of 1986.

Exemption #21. Large Operating Companies

FinCEN exempts “large operating companies” from the BOI reporting requirements. To qualify as a large operating company, a business must have 21 or more full-time U.S. employees, a physical office in the United States, and report over $5 million in revenue on a tax return from the previous year.

Exemption #22. Subsidiaries of Certain Exempt Entities

Entities that are subsidiaries of specific exempt entities also qualify for exemption from filing Beneficial Ownership Information reports with FinCEN.

Exemption #23. Inactive Entities 

FinCEN offers reporting exemptions for business entities it classifies as “inactive” or “dormant”. Simply having no current business activity is not enough to meet this exemption however. To qualify for the inactive company exemption, an entity must meet all six of the following criteria:

  1. The entity was established on or before January 1, 2020.
  2. The company is not engaged in active business.
  3. There have been no changes in ownership in the last 12 months.
  4. The company holds no assets.
  5. The company has no foreign owners.
  6. The company’s income was less than $1,000 in the last 12 months.

Do Inactive Companies Need to File a BOI Report?

Companies that are “inactive” or canceled may be exempt from having to file a BOI Report. However, they need to meet a whole list of other criteria in order to actually qualify for exemption. 

FinCEN provides an exemption for entities that it considers to be “dormant” or otherwise inactive. Your company needs to meet all 6 of the below criteria to qualify for the dormant company exemption: 

1.) The company was formed on or before January 1, 2020. 

Your company must have been established on or before January 1, 2020 to qualify for the dormant company exemption. This is determined by the formation date on your company formation documents.

Not sure when your company was formed? You can check the formation date by searching your company’s name on the Secretary of State’s website.

2.) The company has no active business. 

Your company cannot currently have any business activities. You cannot be providing services, selling products or owning assets through the company.

3.) There’s been no recent change in ownership.

The company cannot qualify for an exemption if there’s been a change in ownership in the last 12 months. If you’ve added Members to an LLC or sold shares in a corporation recently, the company does not qualify for exemption and will need to file a BOI Report.

4.) The company does not own any assets. 

Your company cannot own any assets, whether directly or through another related entity. This includes bank accounts, real estate, vehicles, or ownership in other entities.

5.) The company has not sent or received funds over $1,000. 

The company is disqualified from exemption if it has sent or received more than $1,000 through any financial accounts in the last year. So if you have taken out more than $1,000 from the company’s bank accounts at any point in the past 12 months, the company cannot qualify for an exemption. 

6.) The company cannot have any foreign owners.

Lastly, your company cannot have any owners that are foreign individuals or foreign entities. This includes direct ownership, such as owning shares. However, also take into account any indirect forms of ownership. These may include stock options, buyout agreements, and other future arrangements for control or ownership in the company.

Your company needs to meet all of these criteria in order to be considered dormant and qualify for an exemption from FinCEN. Missing even one of these criteria means the company doesn’t qualify for the exemption and needs to file a Beneficial Ownership Information Report.

How are “Large Operating Companies” Exempt from BOIR?

“Large Operating Companies” are a category of businesses that FinCEN exempts from having to file BOI Reports. FinCEN considers these companies to be low-risk for activities like money laundering or tax evasion, hence the exemption.

A business must meet 3 pieces of criteria to be considered a large operating company and qualify for this exemption:

1.) 21 or More Full-Time Employees in the U.S.

Large operating companies need to employ at least 21 full-time employees within the U.S. FinCEN defines a full-time employee as someone working a minimum weekly average of at least 30 hours in a month.

2.) Physical Address in the U.S.

Large operating companies need to have a physical business presence in the United States. This means that the company owns or leases a space in the U.S. where it regularly conducts business activities. 

3.) More than $5 million in Revenue on a Federal Tax Return

The company must have filed a U.S. federal income tax return for the previous year that reports more than $5 million in gross receipts. This figure is the net amount after returns and allowances, as recorded on IRS Form 1120, IRS Form 1065, or similar forms.

Again, companies need to meet each piece of criteria to qualify for an exemption. If your business has 21 full-time employees, a physical U.S. presence, but does not generate over $5 million in revenue, then it cannot qualify for this exemption. In this case, you would need to file a BOI Report for the entity. 

Do Nonprofits Need to Report Beneficial Ownership Information?

501(c)(3) nonprofit organizations that are exempt from paying federal taxes are also exempt from filing BOI Reports to FinCEN. However, this exemption kicks in only after the entity has received its official tax determination letter from the IRS. 

If your nonprofit is still waiting for this letter, you’re required to submit a BOI Report by the deadline. Once you secure your tax-exempt status, you can then file an exempt report with FinCEN to update the entity’s status.

Do Sole Proprietorships Report to FinCEN?

Sole proprietorships are not required to submit Beneficial Ownership Information Reports to FinCEN. The reason? Sole proprietorships generally aren’t formed through filings with a Secretary of State, which means they don’t fall under the category of  “reporting companies” as defined by the Corporate Transparency Act.

Are Partnerships Exempt from BOI Reports?

When it comes to general partnerships, the need for filing a Beneficial Ownership Information Report (BOIR) depends on how they were formed. If a general partnership does not file a formation document with the Secretary of State, it does not need to submit a BOIR. FinCEN does not classify these types of partnerships as ‘”reporting companies.”

However, limited partnerships that have filed formation documents in their home state do need to file reports. Partners create these entities, which offer limited liability protection, by filing specific documents with a state government.