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Update: Federal Law Requires Registration

By Raul Rivera

This is an update to a post we released earlier this year. In 2021, Congress passed the Corporate Transparency Act (CTA). The new law took effect on January 1, 2024. It requires most companies to submit a Beneficial Ownership Information (BOI) Report. The stated aim behind this new requirement is to make it more challenging for nefarious actors to conceal or profit from illicit gains through the use of shell companies or other non-transparent ownership structures.

The Reporting Rule exempts 23 specific types of entities from the reporting requirements. An entity that qualifies for any of these exemptions is not required to submit BOI Reports to FinCEN.

Which Churches and Ministries are Exempt?

The CTA clearly states that exemptions are granted to entities described in Section 501(c) without regard to Section 508(a) of the Code. Section 508(a) requires that new organizations classified under 501(c)(3) notify the IRS of their intent to seek official recognition of their tax-exempt status. However, the CTA specifically excludes the necessity of complying with Section 508(a). As a result, the exemption under the CTA extends to new nonprofit organizations, including churches, ministries, and other nonprofits, that have not yet applied for or received an IRS exemption determination.

It is essential to understand that, for the purposes of the CTA, to qualify as an organization described in Section 501(c), your organization’s articles of incorporation or other formation documents must include language mandated by the IRS that aligns with the objectives of Section 501(c)(3). Additionally, your documents must feature an IRS-approved dissolution clause.1

Below is a list of organizations that are exempt from filing a BOI Report:

  1. Churches and ministries that have 501(c)(3) status: This is referred to as Exemption #19.

  2. Newly formed churches, ministries, or other nonprofit organizations that have yet to receive official 501(c)(3) status:  If your newly formed organization has filed articles of incorporation or other formation documents containing the language required by the IRS as stated above, then your organization is exempt from having to file a BOI Report. This is referred to as Exemption #19

  3. Subsidiary organizations of the church or ministry: If the church or ministry has a nonprofit LLC subsidiary (also known as an SMLLC), that LLC is also exempt. This is referred to as Exemption #22

  4. A for-profit business that is wholly owned by a church or ministry: The key is that the for-profit business must be wholly owned by one or more 501(c)(3) organizations described in points 1 and 2 above. Wholly owned means that 100% of the business is owned by a 501(c)(3) organization. This is referred to as Exemption #22

  5. A church or ministry that has lost its tax-exempt status less than 180 days ago: Churches and ministries that have lost their tax-exempt status less than 180 days ago must act promptly and GetRIGHT to meet the requirements and avoid penalties. This is referred to as Exemption # 19.

Which Churches and Ministries are NOT Exempt?

  1. A 508 church that does not intend to file for official 501(c)(3) status: A Church that holds itself as tax-exempt under Section 508 and does not consider itself exempt under Section 501(c)(3) must file a BOI Report and update it anytime there is a new change. For greater clarity, a church must file a BOI report if it lacks the necessary IRS-specified language in its formation documents affirming its operation as an organization under Section 501(c)(3).

  2. A church, ministry, or other nonprofit that lost its tax-exempt status more than 180 days ago: If you want to get your 501(c)(3) status reinstated, we can help you with our GetRIGHT program. As soon as your 501(c)(3) status is restored, you will no longer have to file BOI Reports.

  3. DIY Churches or Ministries that want to get 501(c)(3) status but failed to include the required IRS language in their formation documents: We frequently assist churches that have filed their own articles of incorporation only to later discover that they did not include the required IRS language. Unfortunately, this oversight necessitates that the church or ministry file a BOI Report. Once the amendment is approved by the state, they must then file an updated BOI Report to confirm their exemption from the reporting requirements. 

Why Do Some People Say That Newly Formed Churches and Nonprofits Have To File a BOI Report?

I have conducted extensive reading and research on that question. There are many reputable organizations that are misinterpreting the CTA. They are advising newly formed nonprofits, such as churches, ministries, and standard nonprofit organizations, to file an initial report and continue with updates until they secure their official 501(c)(3) status. That is simply not the case. I will now quote what I stated earlier in this post.

The CTA clearly states that exemptions are granted to entities described in Section 501(c) without regard to Section 508(a) of the Code. Section 508(a) requires that new organizations classified under 501(c)(3) notify the IRS of their intent to seek official recognition of their tax-exempt status. However, the CTA specifically excludes the necessity of complying with Section 508(a). As a result, the exemption under the CTA extends to new nonprofit organizations, including churches, ministries, and other nonprofits, that have not yet applied for or received an IRS exemption determination.

It is essential to understand that, for the purposes of the CTA, to qualify as an organization described in Section 501(c), your organization’s articles of incorporation or other formation documents must include language mandated by the IRS that aligns with the objectives of Section 501(c)(3). Additionally, your documents must feature an IRS-approved dissolution clause

Our StartRIGHT Program Has You Covered

All the churches, ministries, CDCs, other nonprofits, and SMLLCs using our StartRIGHT program can rest assured that their formation documents include all the required IRS language, exempting them from having to file a BOI. If you are planning to start a church or ministry, we would love to guide you through the entire process with our StartRIGHT program. Our specialists are really skilled at what they do. It would be our honor to help validate the call God has placed on your life.

Pastors and Leaders who Own Businesses

Many pastors and leaders own for-profit businesses.  The new law requires those businesses to file the report unless the company qualifies as a large operating company.

For an entity to qualify as a “large operating company,” it must meet the following criteria:

  1. Employs 20 or more full-time employees in the United States.

  2. Has an operating presence at a physical address within the United States.

  3. Filed a federal income tax or information return in the United States for the previous year demonstrating more than $5M in gross receipts or sales. This excludes gross receipts or sales from sources outside the United States.

There Are Deadlines To File The Report

For organizations established or registered before January 1, 2024, the deadline to file the initial ownership information report with FinCEN is January 1, 2025.

For organizations formed or registered between January 1, 2024, and January 1, 2025, the deadline is 90 calendar days after forming. This is based on the date you filed papers with the state.

For organizations formed or registered from January 1, 2025, onwards, the deadline is 30 days after filing papers with the state.

Information to Include In The Report

The information to be reported includes the company's:

  1. Legal and trade names,

  2. The address of its principal place of business,

  3. Its jurisdiction of formation or registration, and

  4. Its Taxpayer Identification Number.

  5. Each beneficial owner's personal details, including:

    1. Name,

    2. Date of birth,

    3. Residential address, and

    4. An identifying number from an accepted identification document, such as a non-expired U.S. driver's license, state or local government ID, U.S. passport."

Changes Are Required To Be Reported Within 30 Days,

There is no annual reporting requirement, but any changes to the reported information about the company or its beneficial owners necessitate an updated report within 30 days of the change. This can get a little burdensome if you move and your personal address changes, or if the company changes its name, as shown below.

Examples of Changes Requiring an Update

Examples of changes requiring an updated report include;

  1. changing the name of the business or

  2. a change in beneficial owners, such as a new CEO or

  3. a sale altering ownership interest.

  4. changes to a beneficial owner’s address and/or identifying information require a new report, including an image of the updated identification document.

Failure to report or timely update beneficial ownership information may result in civil and criminal penalties.

Filing The Report

Reporting can be done electronically through FinCEN’s secure filing system. You are allowed to use third-party service providers to assist with submitting the required information, and there is no obligation to engage an attorney or CPA for this process, though they may be consulted if needed. You can file at https://www.fincen.gov/boi.

Are there Fines If We Fail to report?

Yes! Penalties for failing to comply include a civil penalty of $500 per day, with a cap at $10,000. Additionally, there may be criminal penalties for failure to file which could include up to 2 years imprisonment.

Remembering To Update

For the pastors and leaders that own their own businesses, reporting is not very difficult. The part that I think will be difficult is remembering to update the information on the report every time the business or one’s personal information changes. By staying informed about these reporting requirements and maintaining up-to-date records, your organization can ensure compliance and continue focusing on its mission without legal interruptions.

Don't let compliance with the new Corporate Transparency Act (CTA) overwhelm you. Protect your organization today and stay focused on your mission. Contact us at 770-638-3444 for personalized support and to ensure compliance with the Corporate Transparency Act.

  1. Nonprofit status and being tax-exempt under Section 501(c)(3) are related but distinct concepts. Nonprofit status is granted based on individual state laws, which looks at an organization's purpose and operations. On the other hand, tax exemption (public charity status) under Section 501(c)(3) is a federal benefit that exempts organizations from paying federal income tax on their net income and allows them to receive tax-deductible contributions. It's important to note that the Corporate Transparency Act (CTA) only exempts organizations that specifically meet the federal criteria described in Section 501(c)(3) from the requirement to file a Beneficial Ownership Information (BOI) Report.

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