A recent regulation may have significant implications for churches and nonprofits, and we implore each church to read and understand whether or not this regulation is applicable to your church or nonprofit. The Corporate Transparency Act was recently enacted under the National Defense Authorization Act for Fiscal Year 2021 and mandates new federal reporting requirements for many corporations and LLCs to the Financial Crimes Enforcement Network.
Accordingly, certain entities are required to report the legal name, date of birth, address, and a unique identifying number from an acceptable document, such as a passport or driver’s license, for each beneficial owner of the entity. If applicable, this means this may be required for a nonprofit for the officers, directors and/or its members. If an entity fails to report and is required to, they could be subject to up to a $500 per day penalty, indexed for inflation, and possible imprisonment. This filing is due by January 1, 2025, for entities created before January 1, 2024. If an entity was created in 2024, they have 90 calendar days to file after receiving notice that their creation or registration is effective.
Generally, churches will be exempt from this reporting. However, the exemption applies to churches who have obtained a 501(c)(3) determination letter. Most Southern Baptist churches in Arkansas do not have a 501(c)(3) determination letter and have used the Arkansas Baptist State Convention’s (ABSC) group exemption letter when requested from governmental and financial institutions. Furthermore, the ABSC does not have any control over the churches who choose to cooperate with the ABSC. For this reason, it seems that a church or nonprofit that has previously relied on ABSC’s group exemption may now be subject to this reporting.
Next Steps:
- Arkansas churches and nonprofits should assess whether they are subject to this reporting requirement by seeking advice from legal and tax counsel.
- Ensure your church or nonprofit can locate its essential corporation documentation like articles and bylaws, articles of incorporation and 501(c)(3) determination letter.
- If you are subject to this reporting requirement, make sure you keep the report updated because any updates are required to be reported within 30 days of the change.
- Consider obtaining a 501(c)(3) determination letter to ensure your entity is exempt from reporting going forward.
The information contained in this article does not constitute legal or tax advice and you should consult with your own legal counsel or tax counsel about your situation. If you have questions about this article or the Foundation’s services, please contact us at 501-376-4791 or [email protected].