AMES, Iowa – Farmers who operate as a corporation or an LLC or a limited partnership will need to pay close attention to a law passed at the beginning of 2021 implementing new reporting requirements in 2024.
The Corporate Transparency Act, created to curb illicit financial transactions and money laundering, requires most registered companies to complete “Beneficial Ownership Information Reports,” in 2024. Congress tasked the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Treasury, to establish and maintain a national registry of beneficial owners.
In these online reports, companies must provide information about the company, as well as information about each beneficial owner. Beneficial owners include anyone who owns at least 25% of the company, as well as anyone who has “substantial control” over the business. For each beneficial owner, the company must report the name, date of birth, home address and identifying number of an acceptable proof of identification, such as a driver’s license. They must also upload an image of the identification document.
Companies that existed before the start of 2024 have until Jan. 1, 2025, to file the form, while companies created or registered in 2024 will have 90 days after their creation to file. Any company that has already filed its first report will have just 30 days to report any updates, such as a new beneficial owner or a change in address.
“This is a new law that FinCEN is enforcing this year and we need to get the word out to farmers and others who have registered companies,” said Charles Brown, a farm management specialist with Iowa State University Extension and Outreach. “Existing farm companies have a whole year before the deadline, but we are encouraging people to file sooner rather than later, so they don’t risk fines and penalties for being late.”
What to know
Kristine Tidgren, director of the Center for Agricultural Law and Taxation at Iowa State, recently wrote an article to help explain the new law and what farmers are required to do.
“There are many important parts to this law, including who exactly must file a report, and what they must include,” said Tidgren. “This is a federal law and our goal is to help people understand what they are required to do.”
The Corporate Transparency Act was part of the Anti-Money Laundering Act of 2020 in the National Defense Authorization Act for Fiscal Year 2021, according to Tidgren. The law requires the FinCEN to establish and maintain a national registry of beneficial owners of entities that are otherwise not subject to disclosure regulations.
Who must file?
The rule identifies two types of companies that must report: domestic and foreign. Domestic reporting companies are entities created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.
This generally means that LLCs (including single-member LLCs), corporations and limited partnerships are required to file reports if they are not otherwise exempted from the reporting requirement. The law’s 23 exemptions from reporting generally apply only to large entities that already disclose owner information in other ways. Most tax exempt entities, however, are not required to file reports, regardless of size.
How to file
Companies and entities that are required to file the report must do so online, at https://boiefiling.fincen.gov/fileboir.
If a required entity fails to file on time, penalties can be as high as $500 for each day in violation, with criminal penalties up to $10,000 and possible imprisonment.
Brown said he understands the frustration some farmers might feel about having to file another form, but he said it’s a federal requirement.
“As a farm management specialist, my goal is to help people understand the things they must do, and this is one of those,” he said. “The law was decided by Congress, and now that it is in effect, I want to educate Iowans so they can comply.”
Photo credit: Person filling out form, by PheelingsMedia/stock.adobe.com