Which Entities Are Exempt from Submitting BOI Reports

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Which Entities Are Exempt from Submitting BOI Reports?


The Corporate Transparency Act (CTA) requires certain companies to submit Beneficial Ownership Information (BOI) reports to the Financial Crimes Enforcement Network (FinCEN). However, there are several categories of entities that are exempt from this requirement. Understanding which entities qualify for an exemption can help companies avoid unnecessary reporting.

Tax-Exempt Entities


Entities that are exempt from taxation under specific sections of the Internal Revenue Code (IRC) are not required to submit BOI reports. The following types of tax-exempt entities qualify for an exemption:
⦁ 501(c) Organizations: Any entity described under section 501(c) of the IRC and exempt from taxes under section 501(a) qualifies for an exemption. This includes charities, religious organizations, and other nonprofit entities.
⦁ Recently Lost Tax-Exempt Status: Organizations that lost their 501(a) tax-exempt status within the last 180 days still qualify for the exemption.
⦁ Political Organizations: Entities defined under section 527(e)(1) of the IRC as political organizations, which are also exempt from taxes under section 527(a), do not need to submit BOI reports.
⦁ Certain Trusts: Trusts described under section 4947(a) paragraphs (1) and (2) also meet the criteria for exemption.

Which Entities Are Exempt from Submitting BOI Reports


Inactive Entities

Inactive entities can also qualify for a BOI reporting exemption if they meet all of the following six criteria:
⦁ The entity must have been established on or before January 1, 2020.
⦁ The entity is not currently engaged in any active business operations.
⦁ It is not owned, directly or indirectly, by any foreign individuals or entities.
⦁ There have been no changes in ownership within the past year.
⦁ The entity has not sent or received any funds exceeding $1,000 in the past 12 months.
⦁ It does not hold any assets, either within the United States or abroad.
Subsidiary Exemptions
Certain subsidiaries are also exempt from submitting BOI reports. To qualify, a subsidiary must be fully owned or controlled, directly or indirectly, by an exempt entity. Some examples of exempt parent entities include:
⦁ Securities reporting issuers
⦁ Government authorities
⦁ Banks and credit unions
⦁ Insurance companies
⦁ Large operating companies
⦁ Tax-exempt entities

Which Entities Are Exempt from Submitting BOI Reports tutorial boir fincen

Partial ownership by an exempt entity does not qualify a subsidiary for the exemption—ownership must be 100 percent.

Large Operating Companies


Large operating companies that meet specific criteria are exempt from BOI reporting. To qualify, a company must:
⦁ Employ more than 20 full-time employees in the U.S.
⦁ Have an operating presence at a physical office within the U.S.
⦁ Report more than $5 million in annual gross receipts or sales.
Companies cannot consolidate employees across multiple entities to meet the 20-employee requirement; the exemption applies only to individual entities that meet all the criteria.

How to Report Exemption Status to FinCEN


If your entity qualifies for an exemption from BOI reporting, there’s no need to notify FinCEN unless your company previously submitted a BOI report. If that’s the case, and the company later qualifies for an exemption, you must file an updated report electronically to reflect the newly exempt status. This updated report will simply require identification of the entity and checking a box to indicate the exemption.
Understanding which entities are exempt from BOI reporting under the CTA can save companies time and resources. Tax-exempt organizations, inactive entities, subsidiaries of exempt entities, and large operating companies are among those that may qualify for an exemption. Be sure to review the criteria carefully to determine whether your company needs to comply with the BOI reporting requirements.