BENEFICIAL OWNERSHIP INFORMATION: FINCEN PROVIDES CLARIFICATION REGARDING LARGE OPERATING COMPANY EXEMPTION

BACKGROUND

Under the federal Corporate Transparency Act (CTA), companies that qualify as “reporting companies” are required to report certain information about their “beneficial owners” to the Financial Crimes Enforcement Network (FinCEN), a bureau of the United States Department of the Treasury. In general, any company that was formed by filing a document with a secretary of state or similar state administrative office (e.g., Articles of Incorporation, Certificate of Organization, etc.) is a “reporting company” unless the company qualifies for one of the available exemptions. On June 10th, FinCEN published an update to its Beneficial Ownership Information Frequently Asked Questions (BOI FAQ), which included clarified guidance on one of the more widely available exemptions—the “large operating company” exemption.

LARGE OPERATING COMPANY EXEMPTION

To qualify for the “large operating company” exemption, a company must have:
1. More than 20 full-time employees in the United States (in general, a “full-time employee” is an employee who is employed an average of at least 30 hours per week.

2. An operating presence at a physical office within the United States

3. A United States federal income tax return for the previous year demonstrating more than $5,000,000 in gross receipts or sales (excluding gross receipts or sales from sources outside the United States).

TAX RETURN FOR THE PREVIOUS YEAR

In its recent update to the BOI FAQ, FinCEN clarified that if a company has not filed a tax return for the previous year, the company may use the return it filed in the previous year for the purposes of determining whether it qualifies for the exemption. However, if the company subsequently files a tax return for the previous year demonstrating less than the requisite amount of gross receipts or sales, and no longer qualifies for the exemption, it will have 30 days from the date it files the return to file its Beneficial Ownership Information report with FinCEN.

The full BOI FAQ can be found here: Beneficial Ownership Information Frequently Asked Questions.

The attorneys at Dvorak Law Group continue to monitor guidance and legal authority concerning the CTA and are ready to advise you on the CTA and whether your business is subject to its reporting requirements.