New York State Revises Its BOI Reporting Law. Thank you New York!

The Beneficial Ownership Information Reporting Requirements final rule (“BOI Reporting Rule”) adopted on September 30, 2022 by the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of the Treasury finally took effect on January 1, 2024.[1] The BOI Reporting Rule gives effect to the Corporate Transparency Act (“CTA”) passed by Congress early in 2021.[2] The BOI Reporting Rule now requires many millions of business entities (most small corporations, limited liability companies, and other similar entities) formed in the United States, which are referred to as “reporting companies,” to report to FinCEN certain identifying information about the beneficial owners who own or control such entities, as well as the company applicants who form or register the reporting companies.

On December 22, 2023, Governor Kathy Hochul signed into law the “LLC Transparency Act,” pursuant to which New York State will piggyback on the federal beneficial ownership information (“BOI”) reporting requirement, at least with regard to limited liability companies formed or authorized to do business in New York.[3] However, Governor Hochul was unhappy with the public disclosure provisions of the LLC Transparency Act, and so the New York Legislature went back to the drawing board almost immediately and passed a revised version of the Act which scraps the public disclosure provisions. On March 1, 2024, Governor Hochul signed into law the revised version of the LLC Transparency Act, which does not take effect until January 1, 2026, over a year after the original version was to have taken effect.[4] The revised version makes a number of changes to where the provisions of the LLC Transparency Act will be incorporated into the New York Limited Liability Company Law (“LLC Law”), so this article is substituted for the prior article we wrote on the original version of the Act.[5]

The LLC Transparency Act incorporates into the LLC Law certain key definitions from the CTA, including “reporting company,” “beneficial owner,” “applicant,” and “exempt company,” with the important difference that, in New York, a “reporting company” will only include domestic limited liability companies formed under New York law and foreign LLCs authorized to do business in New York State.[6] Thus, closely held corporations and entities other than LLCs that are required to report to FinCEN under the CTA and BOI Reporting Rule will not be required to report separately in New York under the LLC Transparency Act. The effect of the LLC Transparency Act is, therefore, that any limited liability company formed or registered in New York that has to file BOI with FinCEN will also have to file BOI with New York’s Department of State.

New York’s BOI reporting requirement is implemented primarily through new Sections 1107 and 1108 added to the LLC Law.[7] When effective on January 1, 2026, Section 1107 will require that a reporting company, within 30 days of filing its articles of organization (for a New York domestic LLC) or an application for authority (for a foreign LLC), must file with the Department of State a “beneficial ownership disclosure” identifying each “beneficial owner”[8] and “applicant”[9] of the reporting company by “(1) full legal name; (2) date of birth; (3) current home or business street address; and (4) a unique identifying number from: (i) an unexpired passport; (ii) an unexpired state driver’s license; or (iii) an unexpired identification card or document issued by a state or local government agency or tribal authority for the purpose of identification of that individual.”[10] In addition to newly formed or authorized reporting companies, existing LLCs will have to file the required information with the Department of State no later than January 1, 2027.[11] Even companies, new and old, that qualify for an exemption under the definition of “exempt company” incorporated from the CTA[12] will have to file an “attestation of exemption” indicating that they are excluded under one of the exemptions.[13] Once reporting companies have filed their initial beneficial ownership disclosure or attestation of exemption, they will be required to file with the Department of State an annual statement confirming or updating: “(1) their beneficial ownership disclosure information; (2) the street address of [the company’s] principal executive office; (3) status as exempt company, if applicable; and (4) such other information as may be designated by the department of state.”[14]

New Section 1108 of the LLC Law will provide for enhanced penalties for violations of the revised LLC Transparency Act beyond those provided for in the original Act. Any reporting company or exempt company that fails to file its beneficial ownership disclosure or attestation of exemption will be deemed “suspended.”[15] A suspended company “shall not conduct business in New York state until its beneficial ownership disclosure or attestation of exemption has been filed” with the Department of State.[16] Companies that fail to file the required beneficial ownership disclosure, attestation of exemption, or annual statement for a period exceeding 30 days will also be shown as “past due” on the Department of State’s records,[17] which may prevent the LLC from completing certain business transactions. In addition, the New York State attorney general may assess a fine of up to $500 for each day a company has been past due.[18] The company also has to pay an additional fine of $250 to remove itself from past due status.[19] If the company fails to file its beneficial ownership disclosure, attestation of exemption, or annual statement for a period exceeding two years, then it will be shown as “delinquent” on the Department of State’s records,[20] which may lead to dissolution of a domestic company by proclamation or annulment of a foreign company’s authority to do business.[21] In addition, the attorney general may assess a fine of up to $500 for each day the company has been delinquent.[22] The revised version of the LLC Transparency Act also declares it to be unlawful for any person to knowingly provide, or attempt to provide, false or fraudulent BOI, including a fake identifying photograph or document, to the Department of State.[23] Finally, for any company that violates this provision by knowingly providing, or attempting to provide, false or fraudulent BOI, or that is delinquent in filing its beneficial ownership disclosure or attestation of exemption, the attorney general may also bring an action seeking the ultimate penalty—dissolution or cancellation of a domestic company or of a foreign company’s authority to do business.[24]

In addition to the enhanced penalties and the extended effective date, the biggest change from the original to the revised version of the LLC Transparency Act is the elimination of the provision that would have amended New York’s Executive Law to add a new section providing for the Secretary of State to maintain on its website a publicly available database on each domestic company and each foreign company authorized to do business in New York State.[25] The revised version of the LLC Transparency Act now provides that all information relating to beneficial owners who are natural persons that is provided to the Department of State “shall be maintained in a secure database and shall be deemed confidential,” subject to four exceptions, including a valid law enforcement purpose.[26] The Act requires the Department of State to “establish provisions for sharing information with agencies to access information relating to beneficial owners” in accordance with one of the exceptions.[27] Presumably, the Department of State will establish guidelines for safeguarding BOI along the lines of those adopted by FinCEN.[28]

[1] For a general description of the BOI Reporting Rule, see eMinutes, FinCEN Reporting — Yes It Is Really Happening (Feb. 23, 2023). The BOI Reporting Rule is codified at 31 C.F.R. § 1010.380.

[2] The CTA is codified at 31 U.S.C. § 5336.

[3] See New York State, Governor Hochul Signs the LLC Transparency Act (Dec. 23, 2023). Governor Hochul signed into law New York State Senate Bill S995-B.

[4] See N.Y. S. Bill S8059 § 10. The original version of the LLC Transparency Act was to have taken effect on December 21, 2024, 365 days after it was signed into law. See N.Y. S. Bill S995-B § 10.

[5] See eMinutes, New York Jumps on the BOI Reporting Bandwagon (Feb. 15, 2024).

[6] N.Y. S. Bill S995-B § 1 (to be codified at N.Y. L.L.C. Law § 1106(a)-(d)).

[7] Id.

[8] For a discussion of who will qualify as a “beneficial owner” subject to the federal and state BOI reporting requirements, see eMinutes, Questions Continue About FinCEN Beneficial Ownership Information Reporting (Dec. 8, 2023), and eMinutes, FinCEN Reporting — Yes It Is Really Happening (Feb. 23, 2023).

[9] For a discussion of who will qualify as an “applicant” subject to the federal and state BOI reporting requirements, see eMinutes, A New Speedbump in the Path to Entity Formation (Jan. 18, 2024).

[10] N.Y. S. Bill S995-B § 1 (to be codified at N.Y. L.L.C. Law § 1107(a), (d)).

[11] Id. (to be codified at N.Y. L.L.C. Law § 1107(e)). Unlike the federal system, which does not require reporting companies formed before the effective date of the BOI Reporting Rule to report information about a company’s applicant or applicants, the LLC Transparency Act contains no such limitation, which could prove very challenging for existing companies.

[12] The full list of exempt entities includes securities issuers, domestic governmental authorities, banks, domestic credit unions, depository institution holding companies, money transmitting businesses, brokers or dealers in securities, securities exchange or clearing agencies, other entities registered pursuant to the Securities Exchange Act of 1934, registered investment companies and advisers, venture capital fund advisers, insurance companies, state licensed insurance producers, entities registered pursuant to the Commodity Exchange Act, public accounting firms, public utilities, financial market utilities, pooled investment vehicles, tax exempt entities, entities assisting tax exempt entities, large operating companies, subsidiaries of certain exempt entities, and inactive businesses. See 31 U.S.C. § 5336(a)(11)(B)(i)-(xxiii); FinCEN, Beneficial Ownership Information Reporting Requirements, 87 FR 59,498, 59,539 n. 186 (Sept. 30, 2022).

[13] N.Y. S. Bill S995-B § 1 (to be codified at N.Y. L.L.C. Law § 1107(b), (e)).

[14] Id. (to be codified at N.Y. L.L.C. Law § 1107(g)). This is different from the CTA and BOI Reporting Rule, which do not require annual filings but only updates when a reporting company’s or beneficial owner’s information changes.

[15] Id. (to be codified at N.Y. L.L.C. Law § 1108(g)). The Department of State must give at least 30 days’ notice of such suspension prior to any change of status. Id.

[16] Id.

[17] Id. (to be codified at N.Y. L.L.C. Law § 1108(a)(1)).

[18] Id. (to be codified at N.Y. L.L.C. Law § 1108(a)(2)).

[19] Id. (to be codified at N.Y. L.L.C. Law § 1108(a)(3)).

[20] Id. (to be codified at N.Y. L.L.C. Law § 1108(b)(1)).

[21] See N.Y. Tax Law §§ 203-a, 203-b.

[22] N.Y. S. Bill S995-B § 1 (to be codified at N.Y. L.L.C. Law § 1108(b)(2)).

[23] Id. (to be codified at N.Y. L.L.C. Law § 1108(c)).

[24] Id. (to be codified at N.Y. L.L.C. Law § 1108(e)(1)).

[25] Id. § 9; see N.Y. S. Bill S995-B § 9.

[26] N.Y. S. Bill S995-B § 1 (to be codified at N.Y. L.L.C. Law § 1107(f)). The four exceptions are: “(1) pursuant to the written request of or by voluntary written consent of the beneficial owner; (2) by court order; (3) to officers or employees of another federal, state or local government agency where disclosure is necessary for the agency to perform its official duties as required by statute or necessary to operate a program specifically authorized by law; or (4) for a valid law enforcement purpose including as relevant to any law enforcement investigation by the office of the attorney general.” Any BOI disclosed by the Department of State pursuant to one of these four exceptions may not be further disclosed by the recipient “except as authorized by law or as otherwise necessary to the performance of statutory duties.” Id.

[27] Id. (to be codified at N.Y. L.L.C. Law § 1107(h)).

[28] See eMinutes, Is It Safe to Submit Residential Addresses to FinCEN as Part of Beneficial Ownership Information? (Mar. 18, 2024).