Beneficial Owner Reporting for Check Book IRA LLCs

by Peter Rizzo

how to add funds to your check book ira llc

The Corporate Transparency Act (CTA), enacted in January 2021, represents a significant stride in enhancing corporate transparency and combatting illicit financial activities in the United States. One of its key provisions involves filing a Beneficial Ownership Information (BOI) report, which mandates certain entities to disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). For entities like Checkbook IRA Limited Liability Companies (LLCs), navigating the requirements of the CTA adds a layer of complexity to their operations

A Checkbook IRA LLC is a unique structure that allows individuals to have more control over their retirement funds by investing in alternative assets, such as real estate, private equity, or cryptocurrencies. In this setup, the IRA funds are invested in an LLC, and the IRA holder acts as the manager of the LLC, hence gaining checkbook control over their investments. This arrangement provides flexibility and autonomy in investment decisions while still enjoying the tax benefits of an IRA.

Implications of the Corporate Transparency Act:

The CTA aims to prevent money laundering, terrorism financing, and other illicit activities by requiring certain entities to disclose their beneficial ownership information. Under the CTA, entities categorized as “reporting companies” must file a BOI report with FinCEN, disclosing information about their beneficial owners, including individuals who directly or indirectly control the entity.

For Checkbook IRA LLCs, the implications of the CTA are twofold. Firstly, LLCs fall within the scope of reporting companies and are thus subject to the BOI reporting requirements if they meet the specified criteria. Secondly, the nature of Checkbook IRA LLCs introduces complexities regarding beneficial ownership, as the IRA holder acts as the manager of the LLC, blurring the lines between personal and corporate ownership. Checkbook IRA LLCs must determine whether they meet the criteria for reporting companies under the CTA. Generally, entities with fewer than 20 full-time employees and gross receipts or sales of less than $5 million in the previous year are exempt from reporting.

 We have attended numerous seminars and asked two noted tax attorneys as to the necessity of Check Book IRA LLCs filing the BOI report.  I’ve got two distinctly different answers. below are the two opinions and I say opinions for at this time that is all they are. We have gotten no clarification from FinCEN as to the validity of each opinion so our guidance is to look at your situation and decide personally how you want to proceed below are the two opinions.

These are opinions from 2 different Attorneys and are merely opinions. You must rely on your own research if you do not report your entity. Check Book IRA, LLC is by no mean giving giving recommendations other than we believe in the conservative approach to these matters and would encourage people to report or change structure until clear direction is given.

1st Opinion

Checkbook IRA LLCs may be exempt from filing a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN) under certain circumstances. Here are some reasons why a Checkbook IRA LLC might be exempt from BOI reporting:

  1. Trust Exemption: While the CTA doesn’t explicitly mention IRA trusts, it does provide exemptions for certain types of trusts, including revocable trusts and trusts established for employee benefit plans. Depending on the specifics of the IRA trust underlying the Checkbook IRA LLC, it may potentially qualify for exemptions from BOI reporting obligations.
  2. Limited Scope of Reporting: Even if a Checkbook IRA LLC doesn’t meet the exemption criteria based on employee count and revenue, it may still be exempt from BOI reporting if it falls under certain categories of entities that are not subject to reporting. For instance, publicly traded companies, regulated financial institutions, and certain government entities are among those exempted from BOI reporting requirements.
  3. Ownership Structure: In a Checkbook IRA LLC setup, the IRA itself is considered the beneficial owner of the LLC’s assets, rather than the individual IRA holder. Since the IRA holder’s control over the LLC is exercised on behalf of the IRA, the Checkbook IRA LLC’s ownership structure may not meet the criteria for reporting as per the CTA.
  4. Regulatory Interpretations: Regulatory agencies may interpret the CTA and its exemptions in a manner that excludes certain types of entities, including Checkbook IRA LLCs, from BOI reporting requirements. Depending on regulatory guidance and interpretations, Checkbook IRA LLCs may find themselves exempt from filing BOI 

    reports with FinCEN.

In summary, various exemptions and nuances in the law, including size thresholds, trust exemptions, and the nature of ownership structures, may exempt Checkbook IRA LLCs from the obligation to file BOI reports with FinCEN. It’s important for investors and advisors to carefully evaluate their specific circumstances and seek professional guidance to determine whether BOI reporting requirements apply to their Checkbook IRA LLCs.

2nd opinion

A Checkbook IRA LLC may need to file a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN) if it meets the criteria defined by the Corporate Transparency Act (CTA). Here are some reasons why a Checkbook IRA LLC might need to file a BOI report:

  1. Inclusion in Reporting Companies: The CTA mandates BOI reporting for “reporting companies,” which broadly include entities like corporations, limited liability companies (LLCs), and similar entities. Checkbook IRA LLCs, being structured as LLCs, fall within this category and are thus subject to BOI reporting requirements unless exempted.
  2. Control and Ownership: While the IRA itself is the beneficial owner of the LLC’s assets, the individual IRA holder typically acts as the manager of the LLC, exercising control over investment decisions. Under the CTA, individuals who exercise substantial control over an entity, directly or indirectly, may be considered beneficial owners and thus subject to reporting requirements.
  3. Transparency and Anti-Money Laundering Measures: The primary aim of the CTA is to enhance corporate transparency and combat illicit financial activities, including money laundering and terrorism financing. By requiring entities to disclose information about their beneficial owners, FinCEN aims to create a more transparent financial system and mitigate the risks associated with anonymous ownership structures.
  4. Prevention of Financial Crimes: Understanding the true ownership and control of entities is essential for preventing financial crimes. BOI reports filed with FinCEN provide law enforcement agencies and regulatory authorities with valuable information to identify and investigate suspicious activities, such as the misuse of corporate structures for illicit purposes.
  5. Compliance and Enforcement: Failure to comply with BOI reporting requirements can result in significant penalties and legal consequences for the entity and its responsible individuals. Checkbook IRA LLCs must adhere to regulatory obligations to ensure compliance with the law and avoid potential liabilities.

In summary, a Checkbook IRA LLC may need to file a BOI report to FinCEN to fulfill its obligations under the Corporate Transparency Act, contribute to enhanced transparency in the financial system, and comply with anti-money laundering measures aimed at preventing financial crimes. 

As you can see these are two distinctly different opinions and it’s up to you to decide which route you would like to take. Many of our clients have said they believe that they are exempt as some of the largest Check Book IRA LLC Providers and some custodians believe they are exempt. The penalties for reporting a very severe and the penalties for not reporting are very severe.  It’s up to you to judge if you want to gamble on an opinion or comply. 

If your LLC originated before January 1st, 2024 you have till December 31st January 2024 to comply if after January 1st, 2024 you have 90 days to comply, but are given a grace period to investigate exemptions. There are also several Lawsuits to halt the reporting for privacy concerns.

There are alternatives now available and that is a trust owned by an IRA. We also have reporting services available. If you would like more information, please email BOI@checkbook.com or IRAtrust@checkbookira.com 

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    4 Comments

    1. allen k whisman

      Once again, Federal law is written to make it truly hard to understand and figure out on which side of the line you’re on.
      Even reading this it seems I am on top of the fence and can fall the wrong way no matter what.
      Guess we have to wait until sometime in September and hope it becomes clearer on which way to fall.
      But filing seems to violate our rights to privacy of owning LLC to protect against lawsuits.

      Reply
      • Peter Rizzo

        Thanks for the comment. You are entirely correct. It is hard to understand and even though the information will not be easily obtainable, people feel that there is another source of information to expose.

        Reply
    2. Alan Rappaport

      Please keep us updated on this important issue. My understanding is that the filing deadline
      0f December 31, 2024 is on hold right now due to current litigation issues.

      Reply
      • Peter Rizzo

        We definitely will. I have not heard of the deadline being in limbo but will check it out. Many people are converting their LLCs to trusts to alleviate the reporting.

        Reply

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