Accounting
New BOI reporting guidance issued for short-lived entities and foreign companies
As we approach Jan 1, 2025, the effective BOI reporting deadline for entities formed before Jan 1, 2024, the Financial Crimes Enforcement Network continues to refine its guidance to help ensure clarity and compliance by releasing crucial updates to its Frequently Asked Questions. The Sep 10, 2024, updates (
For accounting firms and tax professionals, understanding these updates is critical in guiding the tens of millions of LLCs, closely-held businesses, and other small business clients through the complexities of BOI compliance.
Corporate Transparency Act and BOI: A quick review
As I detailed in an article last year, the Corporate Transparency Act is a pivotal part of the Anti-Money Laundering Act of 2020. It marks a significant shift in corporate transparency requirements in the United States, aiming to create a comprehensive database of beneficial ownership information accessible to law enforcement agencies and financial institutions. This initiative is designed to prevent the misuse of corporate structures for illicit purposes, including money laundering, terrorism financing, and tax evasion.
For more background on the Corporate Transparency Act and BOI reporting requirements, read my article
The latest FinCEN updates and their implications
As with any new legislative or regulatory requirement, there is no lack of questions. The latest FinCEN FAQs are particularly relevant for companies that cease operations shortly after formation, foreign entities operating in the U.S., and reporting historical beneficial ownership information.
Reporting requirements for short-lived entities (FAQ C.14)
One of the most significant clarifications from this FAQ update pertains to entities that cease to exist shortly after creation or registration.
The updated guidance establishes a clear mandate: regardless of how quickly a company winds up its affairs, it must fulfill BOI reporting obligations.
While the requirement applies even if the company ceases to exist before the reporting deadline, no additional report is necessary if a company files its initial BOI report and then ceases to exist before the deadline.
Implications for CPAs and tax professionals
With the clarification from FAQ C.14, those who are working with clients on BOI reporting should consider taking these three steps:
- Advising clients to ensure they understand their BOI reporting obligations, even in cases of rapid business closure;
- Maintaining heightened vigilance during company formation and dissolution processes; and,.
- Implementing robust tracking systems to ensure compliance with these tight reporting windows.
Foreign company reporting obligations (FAQ C.16)
Addressing a critical gap in understanding for foreign entities operating in the U.S. market,
The three key points from C.16 regarding foreign entities are:
- Foreign companies are exempt from BOI reporting if they ceased U.S. operations before Jan 1, 2024;
- FinCEN considers a foreign company to have ceased U.S. operations when it completes the formal and irrevocable withdrawal of all U.S. registrations; and
- BOI filing is required for foreign companies registered to do business in the U.S. on or after Jan 1, 2024. Even if they subsequently withdraw registration or had already wound up affairs before that date, they must file a BOI report.
Implications for CPAs and tax professionals
C.14 provides much-needed clarity regarding foreign entities. Anyone working with foreign entities should consider:
- Conducting a thorough review of any foreign clients’ U.S. registration status;
- Assisting in determining the precise dates of registration withdrawal for any borderline cases; and,
- Developing clear communication strategies to inform foreign clients of their reporting obligations, especially those who may have ceased U.S. operations but maintained registrations.
Historical beneficial ownership reporting (FAQ G.4)
The updated
The general rule is that initial BOI reports should only include beneficial owners as of the filing date, but there is an exception.
The exception is specifically for a company that meets all of the following criteria:
- It was created/registered during/after 2024;
- It ceased operations before its reporting deadline; and,
- The report is filed post-dissolution.
If a company meets all three criteria above, the report filed should reflect BOI accurately as of the moment before the company ceases to exist.
Implications for CPAs and tax professionals
With any general rule usually comes exceptions, and FAQ G.4 isn’t any different. If you’re working with clients on BOI, consider:
- Developing clear protocols for capturing “point-in-time” beneficial ownership information;
- Implementing systems to track changes in beneficial ownership, particularly for clients nearing dissolution; and,
- Educating clients on the importance of timely reporting and the potential need to capture historical data in specific scenarios.
Strategies for compliance and client advisory
As accounting and tax professionals, your role in navigating these new requirements is crucial. As you consider the strategies below, make sure your clients understand that you are not providing legal advice; the client should engage legal counsel if such is required.
Read more about BOI and UPL in my article:
Education and communication
- Develop comprehensive educational materials for staff and clients, including regular briefings on CTA requirements and FinCEN updates.
- Create clear, concise communication templates to inform clients of their obligations.
- Ensure you alert clients that you are not providing legal advice and that the client should engage legal counsel if such is required. This language should be included in your engagement letter with your clients.
Technology and process adaptation
- Invest in or develop robust tracking systems for client entity statuses and reporting deadlines.
- Implement automated alerts for approaching deadlines and status changes.
- Establish transparent workflows for gathering and verifying beneficial ownership information.
Risk assessment and mitigation
- Conduct thorough reviews of your client base to identify entities at high risk of noncompliance.
- Develop tailored strategies for complex cases, such as foreign entities or companies nearing dissolution.
- Consider partnering with legal experts for particularly challenging scenarios and cases where a legal opinion is necessary.
Proactive advisory services
- Offer BOI compliance checks/reporting as part of your regular services.
- Guide on structuring decisions that may impact BOI reporting obligations. Again, CPAs must make clear to the client that if a legal opinion is required, the client should consult a lawyer. Avoiding the unauthorized practice of law (UPL) is a must.
- Assist clients in developing internal processes for ongoing compliance and updates.
Continuous learning and adaptation
- Stay abreast of further FinCEN updates and guidance.
- Participate in industry forums and discussions on CTA implementation.
- Regularly reassess and refine your firm’s BOI reporting advisory services approach.
What’s next
The latest FinCEN FAQ updates represent a significant step towards clarifying the nuances of BOI reporting under the Corporate Transparency Act. These clarifications offer both challenges and opportunities for accounting firms and tax professionals. By thoroughly understanding these requirements and their implications, you further position yourselves as invaluable advisors in an increasingly complex regulatory landscape.
As we move closer to full implementation of the CTA, staying informed and agile cannot be overstated. These updates on short-lived entities, foreign company obligations, and historical reporting are the latest guidance from FinCEN to respond to confusion and unanswered questions. Many unanswered questions remain, and continued guidance will be forthcoming.
The Financial Accounting Standards Board issued a
U.S. GAAP currently doesn’t provide specific authoritative guidance about the recognition, measurement, and presentation of a grant received by a business entity from a government. Instead, many businesses currently apply the International Financial Reporting Standards Foundation’s International Accounting Standard 20, Accounting for Government Grants and Disclosure of Government Assistance, by analogy, at least in part, to account for government grants.
In 2022 FASB issued an Invitation to Comment, Accounting for Government Grants by Business Entities—Potential Incorporation of IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, into GAAP. In response, most of FASB’s stakeholders supported leveraging the guidance in IAS 20 to develop accounting guidance for government grants in GAAP, believing it would reduce diversity in practice because entities would apply the guidance instead of analogizing to it or other guidance, thus narrowing the variability in accounting for government grants.
Patrick Dorsman/Financial Accounting Foundation
The proposed ASU would leverage the guidance in IAS 20 with targeted improvements to establish guidance on how to recognize, measure, and present a government grant including (1) a grant related to an asset and (2) a grant related to income. It also would require, consistent with current disclosure requirements, disclosure about the nature of the government grant received, the accounting policies used to account for the grant, and significant terms and conditions of the grant, among others.
FASB is asking for comments on the
“It will not be a cut and paste of IAS 20,” said FASB technical director Jackson Day during a session at Financial Executives International’s Current Financial Reporting Insights conference last week. “First of all, the scope is going to be a little bit different, probably a little bit more narrow. Second of all, the threshold of recognizing a government grant will be based on ‘probable,’ and ‘probable’ as we think of it in U.S. GAAP terms. We’re also going to do some work to make clarifications, etc. There is a little bit different thinking around the government grants for assets. There will be a deferred income approach or a cost accumulation approach that you can pick. And finally, there will be different disclosures because the disclosures will be based on what the board had previously issued, but it does leverage IAS 20. A few other things it does as far as reducing diversity. Most people analogized IAS 20. That was our anecdotal findings. But what does that mean? How exactly do they do that? This will set forth the specifics. It will also eliminate from the population those that were analogizing to ASC 450 or 958, because there were a few of those too. So it will go a long way in reducing diversity. It will also head down a model that will be generally internationally converged, which we still think about. We still collaborate with the staff [of the International Accounting Standards Board]. We don’t have any joint projects, but we still do our best when it makes sense to align on projects.”
PwC made a $1.5 million investment to Bryant University, in Smithfield, Rhode Island, to fund the launch of the PwC AI in Accounting Fellowship.
The experiential learning program allows undergraduate students to explore AI’s impact in accounting by way of engaging in research with faculty, corporate-sponsored projects and professional development that blends traditional accounting principles with AI-driven tools and platforms.
The first cohort of PwC AI in Accounting Fellows will be awarded to members of the Bryant Honors Program planning to study accounting. The fellowship funds can be applied to various educational resources, including conference fees, specialized data sheets, software and travel.
Krisztian Bocsi/Bloomberg
“Aligned with our Vision 2030 strategic plan and our commitment to experiential learning and academic excellence, the fellowship also builds upon PwC’s longstanding relationship with Bryant University,” Bryant University president Ross Gittell said in a statement. “This strong partnership supports institutional objectives and includes the annual PwC Accounting Careers Leadership Institute for rising high school seniors, the PwC Endowed Scholarship Fund, the PwC Book Fund, and the PwC Center for Diversity and Inclusion.”
Bob Calabro, a PwC US partner and 1988 Bryant University alumnus and trustee, helped lead the development of the program.
“We are excited to introduce students to the many opportunities available to them in the accounting field and to prepare them to make the most of those opportunities, This program further illustrates the strong relationship between PwC and Bryant University, where so many of our partners and staff began their career journey in accounting” Calabro said in a statement.
“Bryant’s Accounting faculty are excited to work with our PwC AI in Accounting Fellows to help them develop impactful research projects and create important experiential learning opportunities,” professor Daniel Ames, chair of Bryant’s accounting department, said in a statement. “This program provides an invaluable opportunity for students to apply AI concepts to real-world accounting, shaping their educational journey in significant ways.”
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