Do Non-profits Need to File a BOI Report?

The Corporate Transparency Act (CTA), enacted to combat money laundering and enhance transparency, introduces new reporting requirements for various entities, including nonprofits.

As of January 1, 2024, many organizations must file a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN).

This article aims to clarify whether nonprofits are required to file such reports and under what circumstances.

What is a BOI Report?

A Beneficial Ownership Information report is designed to provide information about the individuals who ultimately own or control a reporting entity. The purpose of this report is to create a database that can be accessed by law enforcement agencies and financial institutions to help prevent illicit activities such as money laundering, fraud, and terrorist financing.

Key Components of a BOI Report

A BOI report typically includes:

• Names of beneficial owners
• Addresses of beneficial owners
• Dates of birth
• Identification numbers (such as a passport or driver’s license number)
• Upload Copy of ID, Driver’s License or Passport

Who is Exempt from Filing a BOI Report?

In a previous article, we presented who is exempt from filing BOI Reports. Here is a detailed overview of the Nonprofits situation.

Tax-Exempt Nonprofits

Most tax-exempt nonprofits recognized under Section 501(c) of the Internal Revenue Code are exempt from filing a BOI report. This includes:

• Public Charities: Organizations that receive a substantial part of their support from the general public or government.
• Private Foundations: Typically funded by a single individual, family, or corporation and primarily grant funds to other charitable organizations.
• Social Welfare Organizations: Groups that promote the common good and general welfare of the community.

Since these organizations do not have traditional owners, they are not subject to the same reporting requirements as for-profit entities.

Specific Exemptions

The CTA outlines several specific exemptions that apply to nonprofits, including:

• Religious Organizations: Churches and other religious institutions are generally exempt.
• Certain Governmental Entities: Nonprofits that are owned or controlled by government entities may also be exempt.
• Nonprofit Organizations with Limited Activities: Organizations that engage in minimal activities or have limited revenue may qualify for exemptions.

Situations Where Nonprofits Must File

While the majority of tax-exempt nonprofits are not required to file a BOI report, certain situations may necessitate compliance:

Non-Tax-Exempt Nonprofits

Organizations that do not have tax-exempt status from the IRS may be classified similarly to for-profit entities and thus required to file a BOI report. This includes nonprofits that have not applied for or received 501(c) status.

Mixed Ownership Structures

Nonprofits that engage in joint ventures or partnerships with for-profit entities may have reporting obligations. If the nonprofit has owners or members who are not tax-exempt, it may need to disclose this information.

Homeowners Associations (HOAs)

Certain homeowners associations, particularly those that do not qualify for specific tax exemptions, may be required to file a BOI report. This can include some condominium and timeshare associations that operate as nonprofit entities.

Newly Formed Organizations

New nonprofits that have not yet received IRS recognition of their tax-exempt status must file a BOI report within 90 days of formation. This requirement ensures that even organizations in their infancy are transparent about their ownership.

Revoked Tax-Exempt Status

If a nonprofit has its tax-exempt status revoked, it may be required to file a BOI report. This requirement emphasizes the importance of maintaining compliance with IRS regulations.

Compliance and Consequences

Nonprofits that are required to file a BOI report must do so accurately and within the designated timeframe. Failure to comply can lead to significant penalties, including:

• Civil Penalties: Fines that can reach thousands of dollars for failure to report or for providing false information.
• Criminal Penalties: Serious offenses can result in imprisonment for individuals responsible for the organization’s reporting.

In addition to financial repercussions, noncompliance can damage an organization’s reputation and hinder its ability to secure funding or partnerships.

While the majority of tax-exempt nonprofits are not obligated to file a BOI report under the Corporate Transparency Act, it is essential for all organizations to evaluate their specific circumstances.

Nonprofits should consult with legal counsel or compliance experts to ensure they understand their obligations and remain compliant with the new regulations.