Where BOI reporting stands now

By Jill Edmonds

The deadline for most U.S. companies to report information on their beneficial owners to the Financial Crimes Enforcement Network (FinCEN) is fast approaching, and the CPA profession still has questions. 

Oh BOI … what does this all mean?

Most financial professionals have probably heard of Beneficial Ownership Information (BOI) reports by now, but the general public and small business owners across America may be still unaware. Mandated in Section 6403 of the Corporate Transparency Act (CTA) in 2021, BOI reports must be filed by most companies created in or registered to do business in the United States. The rule is part of a larger anti-money laundering initiative.

Last year, FinCEN delayed the reporting deadline for certain companies. Currently, companies created or registered in 2024 must file BOI reports within 90 days of creation or registration. Those companies created prior to Jan. 1, 2025, must file initial BOI reports by Jan. 1, 2025. The AICPA, along the VSCPA and all other state societies, did request FinCEN to delay the deadline by one year.

A webpage on the FinCEN site (fincen.gov/boi) walks business owners and/or their trusted advisors through the BOI reporting process. As of July, FinCEN had only received approximately 2.5 million of the expected 32.6 million reports — so awareness is a huge problem.

CPAs’ questions and concerns

The AICPA and 54 state CPA societies have expressed concern with the rollout of the requirement and the impact BOI reporting will have on the small business community, particularly regarding liability and burdens.

Liability

Because BOI reports don’t fall into the pipeline of a tax preparer’s normal course of work for a client, there are fears they could be considered unauthorized practice of law (UPL). Currently, determination of UPL remains at the state level. In 2023, the VSCPA asked the Virginia State Bar to issue an informal advisory opinion and provide clarity to Virginia CPAs who do not want to open their practices up to liability.

On Aug. 29, 2024, the Virginia State Bar’s Standing Committee on Legal Ethics reviewed our request and declined to issue an opinion. 

We do have guidance from two states (Maryland and New Jersey) that indicate CPAs can complete BOI reports for clients. After reviewing the issue, the Maryland Board of Accountancy said that, in its opinion, the Maryland courts would most likely rule that a CPA may provide clients with BOI information or fill out and file a report using a list of beneficial owners as submitted by the client. To refrain from UPL, the opinion states: “A CPA generally should not answer a BOIR-related question for a client where there is uncertainty as to the answer and resolving that uncertainty would require legal knowledge, skill, and judgment.”

Similarly, the New Jersey Supreme Court’s Committee on the Unauthorized Practice of Law ruled that preparing straightforward BOI reports that are not complex are not considered UPL, but the CPA must tell clients it’s advisable to consult a lawyer. The Committee wrote that it “…relies on the professionalism of CPAs to ensure that such licensees will recognize when a filing is more complex and it is in the client’s interests for a lawyer to be retained in the matter.”

Finally, the Iowa Supreme Court issued an order to update their rules to state that non-attorneys can provide BOI services without fear of UPL.

Burdens on small businesses and CPAs

Completing a BOI report for the first time will be problematic for many businesses, the accounting community asserts. In fact, “FinCEN has woefully underestimated that there will be 32,800,422 burden hours for entities to complete filing in the first year (approximately 1 hour per entity) with an estimated cost of up to $2,614.87 per entity depending on their structure,” the AICPA and state societies stated in an Oct. 30, 2023, letter.

Additionally, there is only a 30-day timeframe to correct or update BOI reports due to inaccuracies or changes of ownership/residential address. This quick turnaround is not only burdensome for small businesses, it also creates more work for accountants who advise clients on BOI reports. They would have to institute 30-day tracking requirements for

BOI when no models currently exist. Clients would have to pay unnecessary costs for this engagement as well.
It makes more sense for CPAs who complete tax work for small businesses to gather updates to BOI information during the yearly tax planning/preparation process.

New businesses may also be concerned about the timing of filing reports related to receiving an employer identification number (EIN) from the Internal Revenue Service. The EIN is required by FinCEN to complete the filing but receiving an EIN can often take a minimum of several weeks. 

Penalties for noncompliance are too arbitrary, the profession also said in its October letter. “Civil and criminal penalties are arbitrarily based on ‘willfully’ not complying with the BOI reporting requirements. … For business owners who innocently lack awareness or business owners with many obligations and unable to keep financial filing requirements at the forefront of their minds, the arbitrary definition of ‘willfully’ leaves little comfort given the gravity of the penalties for noncompliance.”

Finally, there are areas of the final regulation that need clarity. FinCEN has been updating its frequently asked questions, so taxpayers and practitioners can review its FAQ page at any time. 

Weren’t BOI reports ruled unconstitutional?

In March, a federal district court in Alabama ruled the Corporate Transparency Act (CTA) unconstitutional in National Small Business United v. Yellen. The Court stated that Congress doesn’t have “the power to regulate millions of entities and their stakeholders the moment they obtain a formal corporate status.”

In response, FinCEN said it would not enforce BOI requirements against the plaintiffs (the 65,000 members of the National Small Business Association). However, in its rule, FinCEN said it would continue to implement the CTA as required by Congress.

By mid-March, the U.S. Department of Justice had appealed the federal court decision, which is now making its way through the appeal process. The AICPA and VSCPA recommend that, in the meantime, small businesses should continue to meet their BOI reporting requirements.

What do insurers say?

In February 2024, CNA, the member insurance program of the AICPA, announced its professional liability insurance coverage generally includes client work associated with BOI reports (subject to policy terms, conditions and exclusions). 

CAMICO, the VSCPA’s preferred insurance provider, issued the following guidance in February as well:

“CAMICO intends that coverage will respond to the typical CTA claim we anticipate receiving, particularly if at the time the services are rendered both the state in which the firm and client reside have not deemed that providing CTA-related services to be the unauthorized practice of law.”

As no case law exists demonstrating BOI reporting and advice to be UPL, Virginia CPAs can reasonably expect CAMICO to cover this professional service. CAMICO has also provided the following resources:

• BOI reporting risk management tips
• FAQs to its hotline
• Sample management representation letter (filing of initial BOI report)
• Sample engagement letter for administrative services (filing of initial BOI report)
• Sample engagement letter for limited CTA advisory services
• Sample client notification letter

What’s next?

Many CPAs are completing reports for clients, encouraged by the response of insurer coverage and also relieved that a simple BOI report more than likely doesn’t qualify as UPL, based on two states’ responses.

The VSCPA offers a new BOI automated reporting solution from Wolters Kluwer. Members can receive a 25% discount on the CCH Axcess Beneficial Ownership solution, an online filing and information management tool that automates the filing process to FinCEN. 

In the meantime, FinCEN representatives are contacting state society representatives to discuss how the accounting profession can spread the word to businesses about compliance. You can help by making sure your clients know (see CAMICO’s sample notification letter and FinCEN’s BOI reporting outreach and education toolkit for help). FinCEN is also communicating directly to consumers with public service announcements like this television ad.

We’ll be monitoring the national landscape, as well as the federal court decision appeal, and communicate any news as we have it. If you have questions or concerns about BOI reporting or advocacy on the issue, contact VSCPA Vice President, Advocacy & Pipeline Emily Walker, CAE.

Jill Edmonds, VSCPA senior director of marketing and communications, joined the Society in 2003. She has decades of experience in association communications and reporting, and has acted as managing editor of Disclosures magazine since she began. She lives in Leesburg, Va., with her husband, two dogs and three teenagers, one of whom attends Virginia Tech. She is a 2000 graduate of the University of Virginia and her favorite punctuation mark is the em-dash.