Reporting requirements for beneficial ownership information (BOI), which will affect millions of businesses across the United States, should be delayed from the planned start date of Jan. 1, 2024, the AICPA said in a statement to Congress.
“Without a delay and given the lack of awareness and steep penalties, we are concerned that millions of businesses, small businesses in particular, will face further hardship and confusion as they try to meet their BOI filing requirement on Jan. 1, 2024,” the statement reads.
The statement was submitted to be included in the record for a July 18 hearing of a subcommittee of the House Financial Services Committee.
The BOI reporting requirement is an anti-money laundering initiative enacted through the Corporate Transparency Act, P.L. 116-283, in 2021 that mandates BOI be reported to the Financial Crimes Enforcement Network (FinCEN). The requirement would apply to most companies.
FinCEN describes a company’s beneficial owners as the persons “who ultimately own or control the reporting companies.” Disclosing information about them will “help law enforcement and national security agencies prevent and combat money laundering, terrorist financing, tax fraud, and other illicit activity, as well as protect national security,” FinCEN said in its Notice of Proposed Rulemaking issued in December 2022.
As first stated in its September 2022 regulatory impact analysis, FinCEN said it is difficult to estimate the number of entities that are reporting companies. It assumes that all entities created or registered before the effective date of Jan. 1, 2024, that are subject to the BOI reporting requirement — 32.6 million entities — will submit their initial BOI reports in the first year. In 2025 and beyond, FinCEN estimates that almost 5 million initial BOI reports will be filed each year — the same estimate as the number of new entities per year that meet the definition of a reporting company and are not exempt. The total five-year average of expected BOI initial reports is 10,510,160.
FinCEN estimates about 6.6 million BOI reports will be filed in 2024, and about 14.5 million such reports will be filed annually for 2025 and beyond. The total five-year average of expected BOI update reports is almost 12.9 million.
“Given the comprehensive scope of filers, awareness of the BOI reporting requirement is critical, yet most businesses are in the dark about the existence of this filing,” the AICPA said in the statement. “In conversations with members, such as a sole practitioner in Pennsylvania, a two-person firm in New Orleans, a mid-size firm in California, we saw their shocked expressions as they learned about this reporting requirement and the associated penalties. Over and over, we have heard that their business clients were unaware FinCEN even existed, much less that this obscure government agency would be requiring sensitive, personally identifiable information in a new filing.”
FinCEN estimated it will take a composite of almost 33 million hours for entities to complete the filing in the first year, with an estimated cost of about $2,600 per entity, depending on the company’s structure. That estimate does not include all costs, such as a monthly tracking of all business owners’ information, to keep up with changes that could occur or have occurred, the AICPA wrote.
In a separate letter to Rep. Patrick McHenry, chair of the House Financial Services Committee, the AICPA estimated that 40,000 of the estimated 50,000 CPA firms in the 55 U.S. licensing jurisdictions are smaller firms and that about 30,000 are sole practitioners. Despite outreach efforts by the AICPA, “some small firms and many more small business clients remain as unaware of the reporting requirements as they are of FinCEN,” said the letter, dated July 14.
The AICPA also said in the letter that it supports the Protecting Small Business Information Act of 2023, H.R. 4035, which would delay the start of BOI reporting.
Delaying the implementation of BOI requirements “is necessary to ensure adequate time and understanding of the BOI reporting requirements by all who must comply, and we urge the Committee to consider H.R. 4035 as soon as possible,” said the letter, signed by Sue Coffey, CPA, CGMA, CEO–Public Accounting, AICPA & CIMA.
In addition to the statement and the letter, the AICPA joined a coalition of organizations to raise awareness of the BOI reporting requirement. The AICPA also submitted comments to FinCEN in February 2022, urging it to consider the burden and cost imposed by BOI reporting requirements.
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