Corporate Transparency Act Reporting for Not-For-Profits

The Corporate Transparency Act (CTA) was enacted by Congress in 2021 as part of the National Defense Authorization Act. It provides transparency into business entity structures with the goal of combatting money laundering, corruption, and other illicit activities that can be committed anonymously through corporate structures.

The CTA went into effect January 1, 2024.

General CTA Reporting Requirements

The CTA includes reporting requirements for beneficial ownership information (BOI) for individuals who own 25% or more of a company or who exercise substantial control over the entity.

Companies subject to the requirements must file an initial report with the Financial Crimes Enforcement Network (FinCEN) according to timelines outlined below and must report any changes to a previously filed report within 30 days of the change.

BOI Reporting Requirements for Not-For-Profits

Domestic and foreign entities that have filed formation or registration documents with a US state or Tribe are subject to the reporting requirements unless they meet one of the exceptions outlined by FinCEN.

Per their Frequently Asked Questions (FAQs), not-for-profit organizations are exempt from the new reporting requirement for:

  • IRS-designated section 501(c) organizations with a tax exemption determination letter from the IRS
  • Political organizations defined by Internal Revenue Code (IRC) Section 527(e)(1) and exempt from tax under Section 527(a)
  • Charitable trusts described in IRC Section 4947(a) paragraph 1 or 2.
  • Entities operating exclusively to provide financial assistance to or hold governance rights over any of the above not-for-profit organizations
  • Wholly owned subsidiary of any of the not-for-profit organizations listed above

Required Reporting

Although the new exemption rules are favorable for the not-for-profit sector, organizations should know when they’re subject to the reporting requirements, such as the following.

501(c) Status Revoked

The organization must submit the required report within 180 days.

IRS Exemption Letter Not Received

There are three date-based results for this scenario:

  • If created before January 1, 2024, the organization has one year to file the registration and possibly receive exempt status by December 31, 2024.
  • If created after January 1, 2024, and before January 1, 2025, the organization has 90 days from date of creation to file the registration report.
  • If created after January 1, 2025, the organization has 30 days from creation to file the registration report.
Filed Required Report and Receives Exemption or Reinstatement of Exempt Status

The entity must file an updated corrected report when exemption or reinstatement is received. Check the box for newly exempt entity and identify your organization.

Multiple Exempt Entities

Beneficial owners who hold their ownership interest in the reporting company through multiple exempt entities may be subject to special rules. For instance, if the beneficial owner owns or controls their ownership interests in a reporting company exclusively through multiple exempt entities, then the names of all exempt entities may be reported instead of the individual beneficial owner’s information.  

For a full list of exceptions, see the Financial Crimes Enforcement Network (FinCEN) BOI Reporting Frequently Asked Questions page, question C.2; there are 23 exemptions in all. Additional details are provided in the FinCEN’s Small Entity Compliance Guide.

Failure to comply with the BOI reporting requirements or missing filing deadlines can result in criminal or civil penalties. There’s a $500 per day penalty, up to $10,000, and up to two years of jail time for the failure to timely file initial or updated reports.

Once an initial report is filed, any changes to previously reported information must be filed within 30 days of the change.

Looking Forward

Reach out to your legal counsel if you have questions regarding the CTA or need help meeting your reporting obligations with FinCEN.

Additional Resources

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