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AOPA Pilot Magazine - March 2023
FINCEN’S BENEFICIAL OWNERSHIP INFORMATION RULE
On September 30, 2022, it was made official that tens of millions of corporations, (LLCs, and other entities and legal arrangements established in the US or conducting business here will be required to report certain information, called Beneficial Ownership Information (BOI), to the Financial Crimes Enforcement Network (FinCEN), part of the Treasury Department.
The new reporting requirements could affect many LLCs and corporations that currently own aircraft or conduct general aviation business.
You can fairly surmise that requiring millions upon millions of entities, partnerships, trusts, and other legal arrangements to report specific information to the federal government is going to be messy.
Unfortunately, the final rule, which establishes this requirement, is not for the faint of heart—clocking in at 99 pages—and requires navigating a series of confusing definitions and exceptions to understand its scope and determine applicability.
There are 4 important steps every entity or legal arrangement must take to determine whether and what to report to FinCEN.
1. It must determine whether it is a “reporting company.”
2. It must identify when the reporting company was created or registered.
3. It must identify and report all “beneficial owners.”
4. It must identify and report all “company applicants,” but only if the reporting company is created or registered on or after January 1, 2024.
The upshot of the rule is that all reporting companies created before January 1, 2024, must provide specific information for all beneficial owners to FinCEN no later than January 1, 2025.
For reporting companies created or registered to do business in the US on or after January 1, 2024, information for beneficial owners and company applicants must be reported within 30 days.
The reporting requirement is broadly applicable to any “reporting company.”
“Reporting company” is, in turn, broadly defined as any corporation, LLC, or entity “created by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe.”
The definition also includes any foreign entity registered to do business in any state or tribal jurisdiction.
There are 23 types of entities that are exempt from the reporting requirement, but many exempt entities are already required to make reports to the government.
As you might expect, many corporations and LLCs that own an aircraft or conduct general aviation business will be considered reporting companies and will be required to report BOI to FinCEN.
“Beneficial owner” is also expansively defined as “any individual who, directly or indirectly, either exercises substantial control over such reporting company or owns or controls at least 25 percent of the ownership interests of such reporting company.”
“Substantial control” and “ownership interest” are defined as well, with specific contours and standards necessary to determine every individual who is a beneficial owner. So, if you own an aircraft through an entity, or are a member of an LLC or other closely held business, there is a good chance that you will be a beneficial owner.
A “company applicant” is an individual who files the documents that create a domestic reporting company or registers a foreign reporting company. Additionally, any individual who is primarily responsible for directing or controlling the filing is also considered a “company applicant.” This means you might be required to keep track of the individuals responsible for creating your entity as well all beneficial owners.
While the goal of this rule is laudable—to reduce or eliminate the use of corporate structures for illicit purposes—it raises important questions concerning privacy and places a burden on millions of legitimate, law-abiding businesses. Failure to timely comply with the rule’s reporting requirements could result in both civil and criminal penalties. Additionally, although the rule itself does not automatically invalidate an entity’s legal status for failing to timely report BOI to FinCEN, it leaves open the door for state and tribal jurisdictions to levy such rules. For aircraft owners, it is important to recall that if an aircraft is owned by an entity, the aircraft’s registration could be jeopardized if the entity loses its legal standing. The BOI rule seems to raise more questions than answers; however, compliance is mandatory, and it is vital that entities be mindful of the looming deadlines. FinCEN has announced it will engage in additional rule making and publish guidance in the not-too-distant future. In fact, a proposed rule regarding access and safeguards to BOI was published on December 15, 2022.
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