Understanding BOI Reporting Requirements for Nonprofits Under the CTA

While the CTA primarily targets for-profit businesses, it’s estimated that 2.4 million nonprofits will be impacted by the new legislation. The CTA aims to combat money laundering, terrorism financing, and other illicit activities by mandating the disclosure of beneficial ownership information. Beneficial ownership refers to individuals who ultimately own or control an entity. Under the CTA, organizations must report certain information about their Beneficial Owners to the Financial Crimes Enforcement Network (FinCEN), ensuring transparency and accountability.

Determining if Your Nonprofit Will Have to File

Of the 23 exemptions to the CTA, nonprofits are most likely to fall into the five categories below.

1. Organizations with federal tax exemption under Section 501 or 527 of the Internal Revenue Code or federally tax-exempt trust or their subsidiaries
2. Entities assisting a tax-exempt entities
3. Large operating companies with more than 20 full-time employees, a physical office in the US, and gross receipts exceeding $5,000,000 reported on last year’s tax return or their subsidiaries
4. Credit unions or their subsidiaries
5. Inactive entities

On the other hand, nonprofits in the below scenarios may have to submit BOI reports.

• Nonprofits that do not intend to seek tax-exempt status at the federal level
• Organizations filing Form 1023 with pending tax-exempt status (Note that once the IRS grants tax exemption, an updated report would likely need to be submitted to declare the exemption.)

• Nonprofit corporations sharing tax-exempt privileges with a fiscal sponsor (Note that if their tax-exempt status changes, they may need to submit an updated report to maintain current records.)
• Nonprofits with revoked tax-exempt status (Note that if their tax-exempt status is reinstated, they may need to submit an updated report.)

Identifying Beneficial Owners

A beneficial owner is any person with at least 25% ownership or who has significant control over the organization’s operations. There is no limit to the number of individuals who can be reported for exercising substantial control. In general, an individual is considered to have significant control over an organization if they fall into any of the below categories:

• Senior Officer – any individual holding the position or exercising the authority of an Executive Director/CEO, President, CFO, General Counsel, COO, or any other officer, regardless of title, who performs similar functions as these officers.
• Appointment or Removal Authority – Anyone able to appoint or remove any senior officer or a majority of the board of directors or similar body.
• Important Decision-Maker – Anyone who directs, determines, or has substantial influence over important decisions made by the organization, including decisions regarding the organization’s
  • Business, such as:
    • Nature, scope, and attributes of the business
    • The selection or termination of business lines or ventures or geographic focus
    • The entry into or termination, or the fulfillment or non-fulfillment, of significant contracts
  • Finances, such as:
    • Sale, lease, mortgage, or other transfer of any principal assets
    • Major expenditures or investments, issuances of any equity, incurrence of any significant debt, or approval of the operating budget
    • Compensation schemes and incentive programs for senior officers
  • Structure, such as:
    • Reorganization, dissolution, or merger
    • Amendments of any substantial governance documents of the reporting company, including the articles of incorporation or similar formation documents, bylaws, and significant policies or procedures
• Individuals with any other form of substantial control over the organization. Control exercised in new and unique ways can still be substantial. For example, flexible corporate structures may have different indicators of control than the indicators included here.

Required Information for BOI Reporting

The following organization details are required as part of the BOI report:

• The organization’s name
• Any trade or DBA names
• State of formation or registration
• Federal EIN
• ID number from its domicile Secretary of State
• Primary address within the US

Additionally, the following details about all beneficial owners must be included:

• Full legal name
• Date of birth
• Residential address
• Photo ID and issuing jurisdiction

Note that organizations formed in 2024 and beyond will be responsible for reporting the same information about “company applicants.” A company applicant refers to the individual(s) who filed the secretary of state documents to create or register your nonprofit entity. For example, you may be the company applicant if you formed your organization. Or, if you worked with a third party to complete filing, that person may be the company applicant.

Conclusion

As a nonprofit organization, staying informed about BOI reporting requirements is essential. By understanding the purpose of the CTA, identifying Beneficial Owners, knowing the required information for reporting, and being aware of exemptions and common reporting scenarios, nonprofits can navigate the regulatory landscape effectively.

To seamlessly meet BOI reporting requirements, we offer our BOI Reporting Service. We’ll complete the reporting process on your behalf, ensuring accuracy and adherence to regulatory standards. Stay ahead of the curve and order our BOI Reporting Service today to easily fulfill your reporting obligations.