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New Rule Affects Subsidiaries of Exempt Entities and Inactive Entities
The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has released a new rule regarding Beneficial Ownership Information (BOI) reporting for subsidiaries of certain exempt entities and inactive entities.
Overview
Under the new rule, if an entity is owned or controlled by one or more entities listed in items 1, 2, 3, 4, 5, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 19, or 21 of the rule, it is considered a subsidiary of a certain exempt entity. This includes entities such as banks, insurance companies, and charitable organizations.
Inactive Entities
An inactive entity is defined as one that:
- Was in existence on or before January 1, 2020
- Is not engaged in active business
- Is not owned by a foreign person
- Has not experienced any change in ownership in the preceding 12-month period
- Has not sent or received any funds in an amount greater than $1,000
- Does not hold any assets
Reporting Requirements
The rule provides guidance on how to report beneficial ownership information for subsidiaries of exempt entities and inactive entities. For example, if a subsidiary is owned by an exempt entity, the reporting company may include the name of the exempt entity instead of personal information about the beneficial owner.
Key Points
- Subsidiaries of certain exempt entities are required to report beneficial ownership information
- Inactive entities that meet specific criteria are also subject to the new rule
- Reporting companies may include the name of an exempt entity instead of personal information about the beneficial owner in certain circumstances
- The rule aims to improve transparency and combat financial crimes by requiring more accurate and complete reporting of beneficial ownership information
Sources
- 31 U.S.C. §5336 et seq.
- FinCEN Rule: 31 CFR 1010.380
- Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. 59536 (September 30, 2022)