A Complete Guide to Corporate Transparency Act Exemptions
FinCEN provides some companies with exemptions from the Beneficial Ownership Information reporting requirements. 23 types of businesses are exempt from the Corporate Transparency Act. Most businesses that are exempt from BOI reporting are already registered with a regulatory or government agency.
The Complete Corporate Transparency Act Exemptions List
These 23 types of entities are exempt from the Corporate Transparency Act and are not required to submit Beneficial Ownership Information reports.
|1.Securities Reporting Issuers||12. Insurance Companies|
|2. Government Authorities||13. State-Licensed Insurance Producers|
|3. Banks||14. Commodity Exchange Act Registered Entities|
|4. Credit Unions||15. Public Accounting Firms|
|5. Depository Institutions Holding Companies||16. Public Utilities|
|6. Money Service Businesses||17. Financial Market Utilities|
|7. Securities Brokers or Dealers||18. Pooled Investment Vehicles|
|8. Securities Exchange Agencies||19. Tax Exempt Entities|
|9. Exchange Act Registered Entities||20. Entities Assisting a Tax-Exempt Entity|
|10. Investment Companies or Advisers||21. Large Operating Companies|
|11. Venture Capital Fund Advisers||22. Subsidiaries of Certain Exempt Entities|
|23. Dormant Entities|
The Big Three Corporate Transparency Act Exemptions
These are the three Corporate Transparency Act exemptions that impact the largest number of private companies.
501(c) Tax Exempt Entities are Exempt
Entities with a federal tax exemption status are exempt from FinCEN. An entity needs to have received official 501(c) tax exempt status from the IRS in order to be exempt from BOI reporting requirements.
An entity will still need to submit a BOI report in the time between when the entity is formed and when it receives its tax exempt status from the IRS. This is upon receipt of a tax determination letter.
Large Operating Companies are Exempt
FinCEN exempts businesses that are considered to be “large operating companies”. Companies need to meet all three of the following criteria to qualify for the large operating company exemption:
- More Than 20 Full-Time U.S. Employees
A company needs to have more than 20 full-time employees located in the United States to be considered a large operating company.
FinCEN defines “full-time employees” to be employed an average of at least 30 hours per week with respect to a calendar month.
- Physical Address in the U.S.
Large operating companies need to have an operating presence at a physical address located in the United States. This means that the company needs to regularly conduct business in a space in the U.S. which the entity either owns or leases.
- Tax Return Showing $5 million in Revenue
Large operating companies need to be able to show a U.S federal income tax return reporting more than $5,000,000 in gross receipts for the previous tax year. This includes the IRS Form 1120, IRS Form 1065, or other applicable IRS Forms.
BOI Tip: Companies that meet only one or two of these criteria are not exempt from the Corporate Transparency Act and need to file Beneficial Ownership Information reports.
Dormant Companies are Exempt
FinCEN provides reporting exemptions for entities considered to be “dormant” or “inactive”. Entities need to meet each and every one of the six following criteria to be considered “dormant” and receive an exemption from Beneficial Ownership Information reporting:
- Entity in Existence On or Before January 1, 2020
The entity needs to have been in existence before January 1, 2020 in order to qualify for the exemption. This is based on the company’s official formation or incorporation date.
- Company is Not Engaged in Active Business
The company does not currently have any active business operations.
- No Recent Changes in Ownership
The company has not experienced any change in ownership in the preceding 12 month period.This includes transfers of LLC Membership, corporate stock or other rights
- Company Holds No Assets
The company, or any affiliated entities, cannot own any assets located either in the United States or aboard. The company also cannot own any interest in any other business entities.
- No Foreign Owners
The company is not wholly or partially owned by any foreign individuals or business entities. This includes both direct and indirect forms of company ownership.
- Income Less than $1,000
The company has not sent or received funds greater than $1,000 through any type of financial accounts or otherwise in the preceding 12 month period.
Corporate Transparency Act Exemptions Explained
Here’s a breakdown of each of the 23 exemption categories under the Corporate Transparency Act.
CTA Exemption #1) Securities Reporting Issuers
Entities registered as an issuer of securities under section 12 of the Securities and Exchange Act are exempt from Beneficial Ownership Information reporting.
CTA Exemption #2) Government Authorities
Government entities at the local, state, or federal level are not required to file Beneficial Ownership Information reports with FinCEN.
CTA Exemption #3) Banks
Banks as defined under the Federal Deposit Insurance Act, the Investment Company Act of 1940, or the Investment Advisers Act of 1940 are exempt from Beneficial Ownership Information reporting requirements.
CTA Exemption #4) Credit Unions
Federal or State credit unions as defined in the Federal Credit Union Act are not required to file Beneficial Ownership Information reports.
CTA Exemption #5) Depository Institution Holding Companies
“Bank holding companies” as defined in the Bank Holding Company Act of 1956, and “savings and loan holding companies” defined in the Home Owners’ Loan Act are exempt from filing Beneficial Ownership Information reports.
CTA Exemption #6) Money Service Businesses
Money transmitting and money services businesses that are already registered with FinCEN do not need to complete Beneficial Ownership Information reports.
CTA Exemption #7) Securities Brokers or Dealers
Securities broker dealers registered under the Securities Exchange Act of 1934 are exempt from filing Beneficial Ownership Information reports.
CTA Exemption #8) Securities Exchange or Clearing Agencies
Exchange or clearing agencies registered under the Securities Exchange Act of 1934 can receive exemption from Beneficial Ownership Information reporting requirements.
CTA Exemption #9) Other Exchange Act Registered Entities
Any entity registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 are exempt from Beneficial Ownership Information reporting requirements.
CTA Exemption #10) Investment Company or Investment Advisers
Investment companies and investment advisers registered with the Securities and Exchange Commission under either The Investment Company Act of 1940 or The Investment Advisers Act of 1940 are exempt from Beneficial Ownership Information reporting.
CTA Exemption #11) Venture Capital Fund Advisers
Venture capital funds and investment advisers described in the Investment Advisers Act of 1940 are exempt from filing Beneficial Ownership Information reports. These entities must have filed Form ADV Item 10, Schedule A and Schedule B of Part 1A with the Securities and Exchange Commission.
CTA Exemption #12) Insurance Companies
Insurance companies defined in the Investment Company Act of 1940 are exempt from filing Beneficial Ownership Information reports to FinCEN.
CTA Exemption #13) State-Licensed Insurance Producers
Entities authorized by a State as an insurance producer and under supervision by the state insurance commissioner or similar agency are exempt from Beneficial Ownership reporting.
FinCEN requires insurance producers to have an operating presence at a physical office in the U.S. in order to qualify for exemption. This means that the entity regularly conducts business at the physical location that it either owns or leases.
CTA Exemption #14) Commodity Exchange Act Registered Entities
Entities registered with the Commodity Futures Trading Commission (CFTC) are exempt from filing Beneficial Ownership Information reports. These include entities defined under the Commodity Exchange Act as futures commission merchants, introducing brokers, swap dealers, major swap participants, commodity pool operators, commodity trading advisors or retail foreign exchange dealers.
CTA Exemption #15) Public Accounting Firms
Public accounting firms registered under the Sarbanes-Oxley Act are exempt from Beneficial Ownership Information reporting requirements.
CTA Exemption #16) Public Utilities
Regulated public utilities, like telecommunications, electrical power, natural gas or water services are exempt by FinCEN from Beneficial Ownership information reporting.
CTA Exemption #17) Financial Market Utilities
Financial market utilities registered by the Financial Stability Oversight Council under the Payment, Clearing, and Settlement Supervision Act are exempt from Beneficial Ownership Information reporting.
CTA Exemption #18) Pooled Investment Vehicles
Pooled investment vehicles or other entities operating by a bank, credit union, investment company, venture capital fund adviser or broker dealer are exempt from filing Beneficial Ownership Information reports to FinCEN.
CTA Exemption #19) Tax Exempt Entities
Entities with a federal tax exemption status are exempt from FinCEN.
CTA Exemption #20) Entities Assisting a Tax-Exempt Entity
Entities with the purpose of assisting a tax-exempt entity can receive exemption from Beneficial Ownership Information reporting. These entities need to meet certain criteria in order to qualify for this exemption status from FinCEN:
a.) The entity operates exclusively to assist a tax-exempt entity, either by providing financial assistance or holding governance rights.
b.) The entity is beneficially owned by real persons who are United States citizens or permanent residents.
c.) A majority of the entity’s funding or revenue is derived from one ore more United States persons who are either U.S. citizens or permanent residents.
d.) The entity is a legally formed entity and a United States person as defined in the Internal Revenue Code of 1986.
CTA Exemption #21) Large Operating Companies
FinCEN exempts businesses that are considered “large operating companies”. Large operating companies need to have more than 20 full-time U.S. employees, a physical office address in the United States, and over $5 million in revenue reported on a tax return from the previous tax year.
CTA Exemption #22) Subsidiaries of Certain Exempt Entities
Entities who are subsidiaries to certain exempt entities will also qualify for exemption from filing Beneficial Ownership Information reports to FinCEN.
Qualified entities include:
- Securities Reporting Issuer, Exemption #4
- Governmental Authorities, Exemption #5
- Banks, Exemption #6
- Credit Union, Exemption #7
- Depository Institution Holding Companies, Exemption #8
- Securities Brokers or Dealers, Exemption #10
- Securities Exchange or Clearing Agency, Exemption #11
- Other Exchange Act registered Entities, Exemption #12
- Investment Company or Investment Advisor, Exemption #13
- Venture Capital Fund Adviser, Exemption #14
- Insurance Company, Exemption #15
- State-Licensed Insurance Producer, Exemption #16
- Commodity Exchange Act Registered entity, Exemption #17
- Public Accounting Firms, Exemption #18
- Public Utility, Exemption #19
- Financial Market Utilities, Exemption #20
- Tax-exempt entity, Exemption #3
- Large operating company, Exemption #1
CTA Exemption #23) Inactive Entities
FinCEN provides reporting exemptions for business entities it considers to be “inactive” or “dormant”. The fact that a company currently does not have any business activity is not enough to qualify for an inactive company exemption.
An entity needs to meet all of the six following criteria to qualify for the inactive company exemption:
- Entity in existence on or before January 1, 2020
- Company is not engaged in active business
- No changes in ownership in the last 12 months
- Company holds no assets
- No foreign owners
- Income less than $1,000 in the last 12 months
Do Exempt Businesses Need to File BOI Reports?
No, a business does not need to file a BOI report to FinCEN if it meets all the criteria for one of the 23 exempt categories. However, if a business no longer qualifies for an exemption or loses its exempt status in the future, it must file a BOI report immediately after losing that status.