Since Treasury Regulation Section 301.6109-1(h)(2)(i) took effect in 1997, the Internal Revenue Service (IRS) has permitted disregard entities, including single member limited liability companies, to use the Employee Identification Number (EIN) of its owner (unless the disregarded entity has employees). Unfortunately, and without any regulatory authority, the Financial Crimes Enforcement Network (FinCEN) is not permitting disregarded entities to use their owner’s EIN for purposes of beneficial ownership reporting. Certain banks also now are requiring that, to open a bank account, a single member limited liability company obtain an EIN. These requirements are in direct conflict with the Treasury Regulations. Under 26 U.S.C.A. § 6109, Congress delegated the authority to determine when and to whom EIN’s must be issued to the IRS.
This regulatory mismatch has created filing complications because the FinCEN online Beneficial Ownership Information (BOI) reports currently only allow one filing per EIN. As a result, a disregarded entity using its parent’s EIN will not be able to file its BOI report without first applying for an EIN from IRS.
This likely means that disregarded entities meeting the Corporate Transparency Act’s “Reporting Company” definition will, in effect, no longer be permitted to use their owner’s EIN going forward unless the Treasury Department corrects the error in conflict with Treasury Regulations. FinCEN has not yet addressed this issue in any of the published guidance, including the Frequently Asked Questions section of its Corporate Transparency Act website.
For further questions regarding this update, contact Liskow attorneys Leon Rittenberg III, Marilyn Maloney, Julie Chauvin and Kevin Naccari and visit our Corporate Transparency Act Resource Page.
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