As a nonprofit leader you may have been hearing about the new requirement for a BOI filing. What is this and do you need to do it? Let’s discuss some basics. The good news is that most nonprofits will not need to file a BOI.
If you do need to file, this crucial document can significantly impact your organization’s finances and compliance. The deadline to file is December 31, 2024.
What is a BOI?
The Beneficial Ownership Information (BOI) refers to identifying information about the individuals who directly or indirectly own or control a company. The filing website was launched on January 1, 2024 – so this is new for everyone. There is no fee for reporting this information and can be easily done on the Financial Crimes Enforcement Network website (this is an official government site). https://www.fincen.gov/boi
Who needs to file?
The BOI form is required for all nonprofits that generate income from business activities that are not directly related to their charitable purpose. This includes revenue streams like event rentals, merchandise sales, and professional services.
Nonprofits that do not have any unrelated business income (UBI) are not required to file a BOI. This typically includes organizations that:
- Rely solely on donations, grants, and other contributions related to their charitable purpose.
- Generate income exclusively from activities directly furthering their tax-exempt mission, such as membership dues or program fees.
- Have UBI that is below the $1,000 threshold for UBIT (Unrelated Business Income Tax) liability.
You do not need to file a BOI if your nonprofit falls into one of these categories. Most nonprofit organizations will not have to file a BOI. However, you should still maintain thorough records in case your tax-exempt status is ever questioned.
The key is to carefully track all sources of revenue and ensure you are properly classifying them as either related to your charitable purpose or unrelated business activities.
Consult a tax professional if you are unsure about your nonprofit’s BOI filing requirements.
If you do need to file a BOI, here are the key rules to keep in mind:
- Timely Submission: The BOI form must be filed annually, typically by the 15th day of the 4th month after the close of your nonprofit’s fiscal year.
- Accurate Reporting: Ensure that all business income, expenses, and activities are accurately reported on the BOI. Under-reporting or omissions can lead to penalties.
- Unrelated Business Income Tax (UBIT): If your nonprofit’s unrelated business income exceeds $1,000, you may owe UBIT. The BOI form is used to calculate this tax liability.
- Allocating Expenses: Carefully allocate expenses between your charitable and unrelated business activities. This can impact your UBIT calculation.
- Maintaining Records: Keep meticulous records of your nonprofit’s business income and expenses. You may need to provide supporting documentation if audited.
Proper BOI filing is essential for nonprofits to maintain compliance, minimize tax burdens, and ensure financial transparency. Consult with a tax professional if you have any questions or need assistance.
By staying on top of BOI requirements, you can focus on fulfilling your nonprofit’s important mission. Let me know if you have any other questions!
