The Corporate Transparency Act (the CTA) went into effect on January 1, 2024 (the Effective Date) and imposed beneficial ownership information (BOI) reporting requirements on any entity that is created or registered by filing a document with any state secretary of state or similar office (Reporting Company).  (Please see our September 2023 Alert and July 2022 Alert for more background on the Corporate Transparency Act.)  The Financial Crimes Enforcement Network (FinCEN), the agency in charge of enforcement of the CTA, has periodically issued Frequently Asked Questions (FAQs) that provide explanatory responses to inquiries it has received related to the CTA.  In July 2024, FinCEN issued new FAQs addressing the BOI reporting requirements (1) for any entity that “ceased to exist” before the Effective Date, (2) for any entity that existed on or after the Effective Date but ceases to exist before its initial BOI report is due to FinCEN, and (3) for any Reporting Company that is disregarded for tax purposes.

Entities that Ceased to Exist Prior to January 1, 2024

In its updated FAQs, FinCEN reiterated that an entity that was created or registered prior to the Effective Date is required to file a BOI report if it continued to exist for any amount of time on or after the Effective Date.  FinCEN clarified that entities that ceased to exist prior to the Effective Date are not required to file BOI reports, because they were never subject to the CTA.  However, entities that began, but did not complete, the process for formally and irrevocably dissolving prior to the Effective Date, are subject to the CTA and required to file BOI reports.

An entity ceases to exist when it is formally and irrevocably dissolved.  FinCEN defers to the jurisdiction where the Reporting Company was registered or created to determine what is required to formally and irrevocably dissolve the entity, but provided that generally a company typically completes this process by filing dissolution paperwork with its jurisdiction of creation or registration, receiving written confirmation of dissolution, paying related taxes or fees, ceasing to conduct any business, and winding up its affairs internally (i.e. fully liquidating itself and closing all bank accounts).  While dissolution is one way that an entity may cease to exist, there are other ways that an entity’s existence may be terminated, such as when an entity merges into another. Though FinCEN did not explicitly address this, the same logic applies to an entity that is merged out of existence, meaning that if it existed independently for any amount of time after the Effective Date, it is required to file a BOI report.

Entities that have been administratively dissolved or suspended for failure to comply with the jurisdictional requirements (such as, failure to file a periodic report or failure to pay a filing fee) do not, generally, cease to exist. While it depends on the jurisdiction of creation or registration, in general, an entity does not cease to exist until the dissolution or suspension becomes permanent.

Entities that Ceased to Exist Prior to Initial BOI Report Due Date

Addressing whether an entity that ceased to exist prior to the due date for its initial report is still required to file an initial report, FinCEN confirmed that even if an entity was formally dissolved prior to the due date for its initial report, it is still required to file an initial report if it existed on or after the Effective Date.  The determinative question in evaluating whether a Reporting Company is required to file an initial report is whether it existed for any amount of time on or after the Effective Date, rather than when it was dissolved or terminated.

Under the CTA, the due date for an entity’s initial BOI report depends on when the entity was created or registered.  Reporting Companies that were created or registered prior to January 1, 2024, have until January 1, 2025 to file their initial BOI reports, while Reporting Companies that were created or registered on or after January 1, 2024, but prior to January 1, 2025 must file their initial reports within 90 days of receiving actual or public notice of creation or registration.  Reporting Companies created on or after January 1, 2025, will have 30 days from receiving actual or public notice of creation or registration to file their initial reports.  Even if a Reporting Company ceases to exist prior to the due date for its initial report, if it existed on or before the Effective Date, it is required to file its initial report.

Disregarded Entities

Under the CTA, a Reporting Company must include one of the following types of Taxpayer Identification Numbers (TINs) in its BOI report: an Employer Identification Number (EIN), a Social Security Number (SSN), or an Individual Tax Identification Number (ITIN).  An entity that is disregarded for tax purposes (a Disregarded Entity) does not always have its own TIN, because it is not treated as a separate entity from its owner for tax purposes.  In its most recent update to the FAQs, FinCEN provided guidance on what TIN a Disregarded Entity should include in its BOI report.

If a Reporting Company has been issued one of the types of TINs listed above, it may provide this TIN in its BOI report.  If a Reporting Company has not been issued one of the types of TINs listed above, the analysis of what TIN it may report in its BOI report is consistent with the IRS rules regarding Disregarded Entities’ use of TINs.  If the Disregarded Entity does not have its own EIN, it is not required to obtain one to comply with the CTA reporting requirements, provided that it can provide another type of TIN.  If the Disregarded Entity has only one owner that is an individual that has a TIN, it may report the SSN or ITIN of its owner.  If the Reporting Company is owned by a domestic entity that has an EIN, the Disregarded Entity may report the owner entity’s EIN as its own.  If the Disregarded Entity is owned by another Disregarded Entity or a chain of Disregarded Entities, the Disregarded Entity may report the TIN of the first owner in the chain that has a TIN, as its own TIN.

Unanswered Questions

FinCEN did not provide additional guidance on who is required to file the BOI report for a dissolved Reporting Company or what beneficial owners should be reported for a dissolved Reporting Company.  An initial BOI report should only include the beneficial owners as of the time of filing, but if the filing is being done after dissolution, it is unclear who the beneficial owners are at that time.  Arguably, a dissolved Reporting Company should include the beneficial owners at the time of dissolution in its initial BOI report, however until FinCEN addresses this area of ambiguity, whenever possible, a Reporting Company that plans to dissolve prior to the due date for its initial report should attempt to file its initial report prior to dissolution.

FinCEN clarified that an entity that is required to file a BOI report is not required to file an updated BOI report informing FinCEN that the entity has been dissolved.  However, FinCEN did not address whether entities are required to update their BOI reports after they have ceased to exist if there is a change to the BOI reported.  Under the CTA if there is a change to the BOI contained in a BOI report, the Reporting Company has 30 days after the date of the change to update its BOI report accordingly.  Following the updated FAQs, it remains unclear if the requirement to update BOI continues after an entity ceases to exist.  In order to minimize BOI that may need to be updated in a BOI report, Reporting Companies should use a FinCEN Identifier for all of the beneficial owners and company applicants being reported.  By doing so, the Reporting Company will not be required to file an update to its BOI report when the BOI of any of these individuals changes (such as their residential address or the expiration of their identifying document).

Conclusion

As we approach January 1, 2025, which is the due date for BOI reports for all entities created before January 1, 2024, we suggest that you continue evaluating the reporting requirements of your entities and filing reports for any entities that are required to report.  Beginning on January 1, 2025, the deadline for filing a BOI report for newly created or registered Reporting Companies will decrease from 90 days to 30 days.  

For background to CTA, please read our September 2023 Alert and July 2022 Alert.