Yet Another BOI post

[Corduroy Frog]

Has there been any change in the penalty?  As long as it remains at $500/per day with no limit, I'm not going to touch it.  I'll refer my LLC customers to a corporate attorney, or try to do it themselves.

Does this apply to LLCs only, or does it apply to any entities (S corps, C corps, partnerships)??

[JimTaxes]

no change in penalty.. applies to any entity that filed organziational documents with their secretary of state is how I understand it so, also covers S Corps and C corps.. many partnerships do not have to file organizational documents.. depends on what kind of partnership

[jklcpa]

FAQs from FINCen's site has a FAQs page that is extensive. Section C answers who must file
https://www.fincen.gov/boi-faqs#C_1

[Lee B]

FAQ  K.2

 

"As specified in the Corporate Transparency Act, a person who WILLFULLY violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. However, this civil penalty amount is adjusted annually for inflation. As of the time of publication of this FAQ, this amount is $591. A person who willfully violates the BOI reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information. [Updated April 18, 2024] "

Emphasis added to "willfully"

[Corduroy Frog]

Thanks Lee B.  So if an entity does not know it has to file, they have not willfully violated the law.  Interesting.

Again, ignorance is bliss.

Judy, thanks for your link.

[Lee B]

1 hour ago, Corduroy Frog said:

Thanks Lee B.  So if an entity does not know it has to file, they have not willfully violated the law.  Interesting.

Again, ignorance is bliss.

Judy, thanks for your link.

They have violated the law, they may not be subject to the penalty,

[Medlin Software, Dennis]

Indeed, some who are in business might be ignorant, but it is no excuse for compliance via direct knowledge, or by paying for knowledge. Meaning ignorance is costly, not bliss.

[JohnH]

It also applies to most Homeowners Associations. That’s a real problem since many small HOA’s have no idea unless they use an outside professional management company or subscribe to HOA-focused publications. 

[Terry D EA]

21 hours ago, JohnH said:

It also applies to most Homeowners Associations. That’s a real problem since many small HOA’s have no idea unless they use an outside professional management company or subscribe to HOA-focused publications. 

You are correct. I'm currently dealing with my HOA in SC. Folks have to watch the 3rd parties as well. We received a solicitation for assistance with preparing the BOI report that was recommended from our property manager to engage with. They wanted 250.00 filing fee which there is none, and another $250.00 prep fee and agreed to file all required annual reports. We may need to file annually due to the change in board members if they are not re-elected. As it stands, I see the only board member to include is the senior officer (President) because he/she has the final say so, and is the go to person.

[Lee B]

"D.13. Who is the beneficial owner of a homeowners association? A homeowners association (HOA) that meets the reporting company definition and does not qualify for any exemptions must report its beneficial owner(s). A beneficial owner is any individual who, directly or indirectly, exercises substantial control over a reporting company, or owns or controls at least 25 percent of the ownership interests of a reporting company. There may be instances in which no individuals own or control at least 25 percent of the ownership interests of an HOA that is a reporting company. However, FinCEN expects that at least one individual exercises substantial control over each reporting company. Individuals who meet one of the following criteria are considered to exercise substantial control over the HOA: • the individual is a senior officer; • the individual has authority to appoint or remove certain officers or a majority of directors of the HOA; • the individual is an important decision-maker; or • the individual has any other form of substantial control over the HOA. [Issued April 18, 2024] "

Be careful. under this FAQ any other senior officer would be a beneficial owner .

For example: A Treasurer or Secretary.

[Randall]

Oh, the tangled web we weave.

[Terry D EA]

17 hours ago, Lee B said:

"D.13. Who is the beneficial owner of a homeowners association? A homeowners association (HOA) that meets the reporting company definition and does not qualify for any exemptions must report its beneficial owner(s). A beneficial owner is any individual who, directly or indirectly, exercises substantial control over a reporting company, or owns or controls at least 25 percent of the ownership interests of a reporting company. There may be instances in which no individuals own or control at least 25 percent of the ownership interests of an HOA that is a reporting company. However, FinCEN expects that at least one individual exercises substantial control over each reporting company. Individuals who meet one of the following criteria are considered to exercise substantial control over the HOA: • the individual is a senior officer; • the individual has authority to appoint or remove certain officers or a majority of directors of the HOA; • the individual is an important decision-maker; or • the individual has any other form of substantial control over the HOA. [Issued April 18, 2024] "

Be careful. under this FAQ any other senior officer would be a beneficial owner .

For example: A Treasurer or Secretary.

Lee you bring up a very good point. I am the Treasurer of our HOA. I will have to read the by-laws and authority the officers have again to see If any officer can bind the HOA, I think that would give them substantial control. I have read D.13 several times and continue to do so. In all reality, no decisions can be made without majority board approval, and no board member can remove one of the officers/board members. In our by-laws a recommendation to remove an officer can be made but again the officer cannot be removed without majority board approval. Not one single member has the authority to do anything. The reason I stated the President is because he presides over the meetings and is the officer that communicates with media and gives orders to the management company. Probably the safe way is to include each board member as a beneficial owner. 

[JohnH]

Unless FinCEN issue clarifications, I'm inclined to think that all board members meet the definition of someone being a pivotal decision-maker having substantial control.  The definition of the position is in relation to the entire HOA, not simply the individual's role within the governing board. There's another reason the BOI filing is going to be a big problem for HOA's and small businesses with multiple Beneficial Owners, because the filing needs to be updated within 30 days when any information changes (including the expiration and renewal of the form of iD used in the most recent filing). 

I also read in one HOA-focused article that HOA's should consider amending their by-laws to make "willingness to provide the information for the BOI filing" a requirement for serving on the board. (Otherwise, what happens if someone is elected to the board and they refuse to furnish a drivers license or passport for the update to the BOI filing?).  It's difficult enough to get qualified people to serve on HOA boards to begin with - the BOI filing requirement only complicates matters even more.  

I don't think this was the intent of the original legislation, and I'm hoping ithe effect on HOA's will be changed or clarified.  But until that happens, HOA's are stuck with the requirements in place. . 

[BulldogTom]

I was in an Update Webinar yesterday and they discussed FinCen Identifiers.   Apparently, you can shift the burden of updating information off of the organization and onto the individual if the individual gets a FinCen Identifier.   

2 uses of this Identifier.  

1.  Person has multiple organizations that they need to be reported for.   Individual gets an Identifier from Fincen and only has to give the number to each entity.

2.  Entity does not want to keep up with the changes of all individuals.   Requires each individual to get an Identifier and the individuals are required to update their personal information when it changes and the entity only reports changes in individuals who are added or removed from the company.

The presenter thought that there would be a movement to make all persons agree to get an identifier from FinCen so the responsibility for updates shifts from the entity to the individual (as well as the fines for non-compliance).

@JohnH you may want to explore this idea with your HOA.

Tom
Longview, TX

[mcbreck]

On 11/12/2024 at 8:16 PM, JohnH said:

It also applies to most Homeowners Associations. That’s a real problem since many small HOA’s have no idea unless they use an outside professional management company or subscribe to HOA-focused publications. 

Our condo association just handed this to me to take care of it.

[Abby Normal]

But condo associations, in my state at least, have no owners.

[Lee B]

1 minute ago, Abby Normal said:

But condo associations, in my state at least, have no owners.

Just took a webinar on BOI Reporting.

Ownership is just one of the qualifiers.

Someone or some group of people have substantial control and decision making authority.

[Abby Normal]

On 11/20/2024 at 2:05 PM, Lee B said:

Ownership is just one of the qualifiers.

Someone or some group of people have substantial control and decision making authority.

That's going to be REAL popular. Asking the whole board for all their personal details.

[Medlin Software, Dennis]

"That's going to be REAL popular. Asking the whole board for all their personal details. "

Absolutely not required, and in most cases, should not be done. Ask them to register (and manage) their own data, then provide the ID. Keeps the person from handling the entity aspect from having to take on managing each individual and allows the individual to enter data as they see fit.

In my own case, I could have done it since I know all the data, but it is not my place to determine what information each person wants to make public. The side, and actually important bene is it is up to them to manage their own data should it ever change. I assume the data will eventually leak to the dark web, if not to a public site (just as it would be foolish to consider one's SSN private). I do not want to worry about more than my own personal data.

[Medlin Software, Dennis]

"Interesting Advice  It's easy to say things like this when you have no responsibility"

If you are making light or questioning my post, I have responsibility and have actually gone through the process. The part you did not quote is where I shared my own personal experience. I chose the exact method I am writing about, for the reasons I wrote about. We have a shareholder who does not materially participate. Maybe they do not want their personal information used (address for instance) and prefer to use a company address or other address. This also keeps me from being liable for managing and updating their data. There are some real buts out there, such as one being housed by the federal government who threatened me and mine with death should I respond to a subpoena (convicted for tax fraud). If a BO does not provide the needed data timely, then they can be the one who deals with penalties. BO's have plenty of times where they act responsible, expecting then to register for this on their own should be zero issue.

"In my own case, I could have done it since I know all the data, but it is not my place to determine what information each person wants to make public. The side, and actually important bene is it is up to them to manage their own data should it ever change. I assume the data will eventually leak to the dark web, if not to a public site (just as it would be foolish to consider one's SSN private). I do not want to worry about more than my own personal data."

[JohnH]

On 11/20/2024 at 2:01 PM, Abby Normal said:

But condo associations, in my state at least, have no owners.

With respect to HOA’s, the issue isn’t ownership.  The issue is whether the HOA is registered with the Secretary of State.  If so, then the HOA must file. 

[JohnH]

On 11/20/2024 at 10:08 AM, BulldogTom said:

I was in an Update Webinar yesterday and they discussed FinCen Identifiers.   Apparently, you can shift the burden of updating information off of the organization and onto the individual if the individual gets a FinCen Identifier.   

2 uses of this Identifier.  

1.  Person has multiple organizations that they need to be reported for.   Individual gets an Identifier from Fincen and only has to give the number to each entity.

2.  Entity does not want to keep up with the changes of all individuals.   Requires each individual to get an Identifier and the individuals are required to update their personal information when it changes and the entity only reports changes in individuals who are added or removed from the company.

The presenter thought that there would be a movement to make all persons agree to get an identifier from FinCen so the responsibility for updates shifts from the entity to the individual (as well as the fines for non-compliance).

@JohnH you may want to explore this idea with your HOA.

Tom
Longview, TX

This is an interesting idea.  Thanks for sharing it.  But I’m not inclined to advise the HOA on something not clearly stated by FinCEN in their FAQ’s as acceptable.   Too many risks if the advice is later found to be wrong, and not enough time before Dec 31, 2024 to thoroughly consider it. 
 

Incidentally, the presenter said current estimated compliance by state ranges between 6% and 24%, as I recall.  That could mean the system is going to get overloaded and slow down to a crawl or even seize up in the coming weeks. 

He also raised some troubling scenarios if IRS puts a question on the tax return 2-3 years from now (similar to the Foreign Accounts question on Schedule B. Might create some problems for tax preparers who had not documented that they advised their clients of the requirement  this year. 

[JohnH]

One other interesting (and scary) part of the discussion was third-party filing services.  Some of course are reliable, well-known online companies with long histories in the online space.

But there are also some shady players out there who are using the filing requirement to simply compile the information and then not even bother to complete the filing.  The client winds up with stolen data and also being in non-compliance.

And be careful about recommending that the client use a third party online service.  Especially if their fee seems unusually low when compared to industry standard. 

[TAXMAN]

Wonder what the court ruling will do that was posted on another title.

[Lee B]

6 minutes ago, TAXMAN said:

Wonder what the court ruling will do that was posted on another title.

It's a preliminary injunction which is temporary.