AOPA Pilot Magazine - March 2023 - 28

FOR THE RECORD
It's going
to be messy
FinCEN's beneficial ownership information rule
BY IAN ARENDT
ON SEPTEMBER 30, 2022, it was made official that tens of
millions of corporations, limited liability companies (LLCs), and
other entities and legal arrangements established in the United
States or conducting business here will be required to report
certain information, called Beneficial Ownership Information
(BOI), to the Financial Crimes Enforcement Network (FinCEN),
part of the Treasury Department. The new reporting requirements
could affect many LLCs and corporations that currently
own aircraft or conduct general aviation business.
You can fairly surmise that requiring millions upon millions
of entities, partnerships, trusts, and other legal arrangements to
report specific information to the federal government is going to be
messy. Unfortunately, the final rule, which establishes this requirement,
is not for the faint of heart-clocking in at 99 pages-and
requires navigating a series of confusing definitions and exceptions
to understand its scope and determine applicability.
There are four important steps every entity or legal arrangement
must take to determine whether and what to report
to FinCEN. First, it must determine whether it is a " reporting
company. " Second, it must identify when the reporting company
was created or registered. Third, it must identify and report all
" beneficial owners. " Fourth, it must identify and report all " company
applicants, " but only if the reporting company is created or
registered on or after January 1, 2024.
The upshot of the rule is that all reporting companies
created before January 1, 2024, must provide specific information
for all beneficial owners to FinCEN no later than January
1, 2025. For reporting companies created or registered to
do business in the United States on or after January 1, 2024,
information for beneficial owners and company applicants must
be reported within 30 days.
The reporting requirement is broadly applicable to any
" reporting company. " " Reporting company " is, in turn, broadly
defined as any corporation, limited liability company, or entity
" created by the filing of a document with a secretary of state
or any similar office under the law of a State or Indian tribe. "
The definition also includes any foreign entity registered to do
business in any state or tribal jurisdiction. There are 23 types
of entities that are exempt from the reporting requirement,
but many exempt entities are already required to make reports
to the government. As you might expect, many corporations and
28
AOPA PILOT / March 2023
LLCs that own an aircraft or conduct general aviation business
will be considered reporting companies and will be required to
report BOI to FinCEN.
" Beneficial owner " is also expansively defined as " any
individual who, directly or indirectly, either exercises substantial
control over such reporting company or owns or controls at least
25 percent of the ownership interests of such reporting company. "
" Substantial control " and " ownership interest " are defined as well,
with specific contours and standards necessary to determine every
individual who is a beneficial owner. So, if you own an aircraft
through an entity, or are a member of an LLC or other closely held
business, there is a good chance that you will be a beneficial owner.
A " company applicant " is an individual who files the
documents that create a domestic reporting company or registers
a foreign reporting company. Additionally, any individual who
is primarily responsible for directing or controlling the filing is
also considered a " company applicant. " This means you might
be required to keep track of the individuals responsible for creating
your entity as well all beneficial owners.
While the goal of this rule is laudable-to reduce or eliminate
the use of corporate structures for illicit purposes-it raises
important questions concerning privacy and places a burden on
millions of legitimate, law-abiding businesses. Failure to timely
comply with the rule's reporting requirements could result in
both civil and criminal penalties. Additionally, although the rule
itself does not automatically invalidate an entity's legal status for
failing to timely report BOI to FinCEN, it leaves open the door
for state and tribal jurisdictions to levy such rules. For aircraft
owners, it is important to recall that if an aircraft is owned by an
entity, the aircraft's registration could be jeopardized if the entity
loses its legal standing. The BOI rule seems to raise more questions
than answers; however, compliance is mandatory, and it is
vital that entities be mindful of the looming deadlines. FinCEN
has announced it will engage in additional rule making and publish
guidance in the not-too-distant future. In fact, a proposed rule
regarding access and safeguards
to BOI was published
on December 15, 2022.
This column will keep you
apprised of developments.
ian.arendt@aopa.org
IAN ARENDT is an in-house
attorney with AOPA's Legal
Services Plan and a private
pilot who owns a Piper
PA-12 Super Cruiser.
AOPA Pilot Magazine - March 2023

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