TSCPA Joins the AICPA in Advocating for Delay in BOI Reporting Requirements
TSCPA has joined the AICPA in advocating for the delay of the effective date of beneficial ownership information (BOI) reporting requirements. Recently, TSCPA sent letters to Tennessee’s U.S. Congress members requesting their co-sponsorship of legislation that would delay the effective date of the reporting requirements.
In a statement to Congress, the AICPA said that reporting requirements for BOI should be delayed from the planned start date of Jan. 1, 2024. The statement was submitted to be included in the record for a July 18 hearing of a subcommittee of the House Financial Services Committee.
"Given the comprehensive scope of filers, awareness of the BOI reporting requirement is critical, yet most businesses are in the dark about the existence of this filing," the AICPA said in the statement. "In conversations with members, such as a sole practitioner in Pennsylvania, a two-person firm in New Orleans, a mid-size firm in California, we saw their shocked expressions as they learned about this reporting requirement and the associated penalties. Over and over, we have heard that their business clients were unaware FinCEN even existed, much less that this obscure government agency would be requiring sensitive, personally identifiable information in a new filing."
Enacted by the Corporate Transparency Act, P.L. 116-283, in 2021, the BOI reporting requirement is an anti-money laundering initiative that mandates BOI be reported to the Financial Crimes Enforcement Network (FinCEN). The requirement applies to corporations, LLCs and other entities formed under state law (domestic reporting companies) or similar entities formed under foreign law and registered to do business in the U.S. (foreign reporting companies).
Starting Jan. 1, 2024, disclosure is required for a beneficial owner, who is any individual who directly or indirectly exercises "substantial control" over the reporting company or who directly or indirectly owns or controls 25% or more of the "ownership interests" of the reporting company. Failure to disclose can result in civil or criminal penalties.
FinCEN estimated that approximately 32.6 million small businesses will be legally obligated to comply on Jan. 1, 2024. Five million more businesses will be added every following year. Large companies will mostly be exempt.
FinCEN also estimated it will take a composite of nearly 33 million hours for entities to complete the filing in the first year, with an estimated cost of about $2,600 per entity. In its statement, the AICPA noted that estimate does not include all costs, such as a monthly tracking of all business owners' information to keep up with changes that could occur or have occurred.
In a separate letter to House Financial Services Committee Chair Rep. Patrick McHenry, the AICPA estimated that 40,000 of the estimated 50,000 CPA firms in the 55 U.S. licensing jurisdictions are smaller firms and that about 30,000 are sole practitioners and expressed concern that despite outreach efforts by the AICPA, "some small firms and many more small business clients remain as unaware of the reporting requirements as they are of FinCEN.” The AICPA also stated in the letter that it supports the Protecting Small Business Information Act of 2023, H.R. 4035, which would delay the start of BOI reporting.