The only thing certain in life is death and taxes, but at least death doesn't get worse each time Congress passes a new law.
In 2021, Congress passed the Corporate Transparency Act with the goal of combating illicit financial activity including money laundering and tax fraud. Believing national security was as risk, Congress authorized the US Treasury Department (the parent organization of the Internal Revenue Service) to adopt rules requiring owners of all privately owned companies to report their ownership to the federal government. After years of review, the Treasury Department finally issued those rules, which became effective on New Year's Day 2024.
Under the new rules, almost every private business in the United States (including corporations and limited liability companies) must file a so-called "Beneficial Owner Information" report (or "BOl") to the Treasury Department's Financial Crimes Enforcement Network (or "FinCEN"), a little-known federal law enforcement agency known probably only to your bank. Previously, FinCEN was mostly concerned with various reports filed by your bank under the federal Bank Secrecy Act which required your bank to inform the federal government whenever you engaged in suspicious activity. You probably didn't know that because federal law prohibits the bank from telling you they have filed one. Even though millions of these reports are made each year, Congress felt more information was still needed. Enter the BOl report.
The BOI report must disclose to FinCEN any person who, directly or indirectly, either owns 25 percent of the company or who has substantial control over the company. While the ownership requirement is simple enough, the "substantial control" part covers anyone at the company who is an important decision-maker.
For example, you and your spouse jointly own a small business but have hired a general manager to handle the day-to-day operations. All three of you would have to be disclosed in the BOl report. This includes your full name, date of birth, current address, and a photocopy of your driver's license. All this information must be submitted to the FinCEN and regularly updated should there be any changes.
But what if you don't file a BOI? Any person who violates the BOl rule is subject to a $500 per day penalty and up to two years in federal prison. But don't worry, the Treasury Department is required to keep the information you've submitted absolutely confidential. It's not like the impartial federal government has ever used taxpayer information to improperly audit political opponents or leaked tax returns to affect election outcomes.
Surely any similarity between those past activities and this new BOl rule is just a coincidence. I mean, what are the chances it will happen again?
— John Tyler Hammons