Overview
In September 2022, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a final rule to implement beneficial ownership information (BOI) reporting standards.
These new standards are framed as providing transparency for FinCEN, national security and law enforcement agencies to combat international crime and security threats, but the BOI rule will present new requirements for qualifying property management or holding companies to report their ownership when it takes effect on January 1, 2024. All potentially qualifying companies should consider contacting an attorney to ensure compliance with this new rule as it takes effect.
What This Means
The BOI rule covers most business entities, defined as a “reporting company,” which operate within the United States[1] and can include multifamily housing operators.
This rule further requires the disclosure of specific identifying information[2] about beneficial owners: individuals who directly or indirectly own or maintain ‘substantial control’[3] over a reporting company or an individual that directly or indirectly owns or controls more than 25% of the ownership interests of the reporting company.[4]
Additionally, if the reporting company was formed or registered after the implementation date of January 1, 2024, up to two agents acting on a reporting company’s behalf like attorneys, corporate formation agents and paralegals are subject to the reporting requirement as company applicants[5].
Housing providers that qualify as a reporting company under this rule and were formed and operating prior to January 1, 2024, will be required to enter their BOI data before January 1, 2025.
What NAA is Doing
The National Apartment Association (NAA) joined a coalition of real estate trade associations in a comment letter responding to the 2022 Notice of Proposed Rulemaking on the BOI Reporting Requirements. As part of that advocacy, the coalition urged clear and transparent rules and processes with open lines of communication between the enforcement entity to make compliance workable for all housing providers.
FinCEN is currently developing an electronic database to store and make accessible this BOI information and will issue a final rule regulating access to this highly sensitive information. FinCEN will also publish revisions to the Customer Due Diligence rule that governs frameworks for depositories to capture beneficial ownership data to comply with the CTA.
NAA will continue to advocate for clear and transparent processes associated with FinCEN’s BOI rules. To learn more, FinCEN has issued a fact sheet on this rule.
For more information on NAA’s regulatory advocacy on Beneficial Ownership Information rules, please contact Joe Riter, NAA’s Senior Manager, Public Policy.
[1] This includes distinctions between foreign and domestically formed or registered business entities.
[2] A reporting company will be responsible for disclosing for each individual who is a beneficial owner or a company applicant: (1) the individual’s name, date of birth, and address; (2) A unique identifying number from an acceptable identification document; and (3) the name of the state or jurisdiction that issued the identification document.
[3] The final rule sets forth the standard for determining whether an individual has “substantial control” over a reporting company.
[4] The final rule sets forth the standard for identifying “ownership interest” over a reporting company.
[5] These individuals are identified as a “company applicant” in the BOI Rule and are only required to be reported if the reporting company was formed after January 1, 2024. A reporting company may only designate two individuals and specific information on these individuals must be disclosed.