Beneficial Ownership Information for Nonprofits: Changes Coming in 2025
Several months ago, we posted an article and accompanying video about Beneficial Ownership Information (BOI) filings for nonprofits. We’re almost one year into this new requirement, and with 2025 on the horizon, what changes and/or updates do you need to know? Read on and find out about this information that is critical to your organization.
We wrote this in our previous article:
The Corporate Transparency Act (CTA), enacted as part of the National Defense Authorization Act for Fiscal Year 2021, mandates new federal reporting requirements aimed at combating money laundering, financing of terrorism, and other illicit activities.
The CTA is governed by FinCEN (Financial Crimes Enforcement Network), which is a federal government agency attached to the US Department of Treasury. The rules, which went live in January 2024 requires businesses (including nonprofits) to register with FinCEN and provide detailed information about the individuals who ultimately own the company. There are no required annual filings after the initial registration. But, if any changes to that information occur, the FinCEN registration must be updated within 30 days of the change.
The good news is, 501(c)(3) organizations are generally exempt from BOI reporting requirements. However, that assumes a nonprofit already has a 501(c)(3) determination letter from the IRS. If they do not, they are liable to report to FinCEN. Quoting from our previous article,
This (exemption) does not apply to nonprofit entities that have not received a 501(c)(3) determination letter from the IRS. Even if your nonprofit has applied for 501(c)(3) status, it must report BOI information and updates until such time as the 501(c)(3) status is approved. Once it is approved, the nonprofit must update their BOI information to show that as a tax-exempt organization, they are no longer liable for future BOI filings.”
Also as a reminder, if your nonprofit has its 501(c)(3) status revoked by the IRS for failure to file Form 990 for 3 consecutive years, your organization is also no longer exempt from BOI reporting. The implications of have two distinct possibilities:
- If your organization had previously registered with FinCEN and subsequently updated its registration to indicate future ongoing exemption due to having received 501(c)(3) status, you must update your BOI registration to show your nonprofit is no longer exempt. Or,
- If your organization was formed AND received 501(c)(3) status before January 1, 2024, you must create a new BOI registration with FinCEN.
Watch Out for Bad Advice!
Beware of tax or consulting firms that tell you that nonprofits are blanketly exempt from registering BOI with FinCEN. They are categorically misinterpreting the regulations. Following their advice could cost you dearly.
FinCEN has been very clear: If your organization is a nonprofit entity (other than a church) that does not currently have a 501(c)(3) determination letter, you must comply with BOI reporting requirements.
There are two significant changes coming to the current rules. These changes go into affect January 1, 2025. They are:
Due Date Changes
The first change impacts how long an entity has to comply with reporting requirements. For the first year of BOI requirements (2024), FinCEN allowed for 90 days after formation to file an initial registration. That same deadline applied for reporting changes to BOI information.
Starting in 2025, that timeline moves to just 30 days.
Penalties Assessed
This is the really painful part. For this first year of the regulations, FinCEN has not charged any penalties for failure to file or for late filing of either the initial registration or changes. That’s about to change!
$500 Penalty Per Day of Non-Compliance
Starting January 1, 2025, FinCEN will assess a penalty of $500 per day, indexed to inflation, for every day an initial registration or change update is late. Because of our current climate of high inflation, that daily penalty has already risen to $591 per day, and they haven’t even begun issuing penalties!
As we have said all year, BOI reporting is serious business. With the upcoming changes to both the deadlines and penalty assessment, you simply cannot afford to be out of compliance.
To learn more, visit FinCEN’s website at: www.fincen.gov/boi .
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