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#2193416 - 09/21/18 07:28 PM Benefical Ownership on an Association
RVaughn, CAMS Offline
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I am hoping some of my peers can settle an ongoing question we have at my institution. For an association, for example an Area FFA Association, would the certification of the control prong be required? The confusion we currently have is a particular association has a TIN, and we are able to verify it's active tax status of the State. However it has not been issued a Secretary of State file number - would this make it unregistered? And it if it is unregistered, then would it be completely excluded from UBOR?

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#2193422 - 09/21/18 07:58 PM Re: Benefical Ownership on an Association RVaughn, CAMS
bcompliance Offline
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If your state doesn't require those types of entities to register, they are exempt

https://www.federalregister.gov/d/2016-10567/p-614
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#2193518 - 09/24/18 02:02 PM Re: Benefical Ownership on an Association RVaughn, CAMS
John Burnett Offline
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Put another way, if the association isn't incorporated, it's not a legal entity customer.
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#2194282 - 10/01/18 04:01 PM Re: Benefical Ownership on an Association RVaughn, CAMS
Rae Offline
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I have another question that just came up at my FI. Does beneficial ownership apply to an escrow account for a corporation? Since we never see the actual owner of said account...(this one is set up by a title company). Appreciate any guidance you may offer.

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#2194283 - 10/01/18 04:05 PM Re: Benefical Ownership on an Association RVaughn, CAMS
BrianC Online
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If this is an intermediated account, then the legal entity that opened the account is the title company and you obtain CIP information and beneficial ownership on the title company.

The type of account is not relevant. The questions to ask are:

Who is my customer for CIP?
Is that customer a legal entity?
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#2194307 - 10/01/18 05:49 PM Re: Benefical Ownership on an Association RVaughn, CAMS
Rae Offline
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Thank you!

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#2194839 - 10/05/18 06:37 PM Re: Benefical Ownership on an Association Rae
John Burnett Offline
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Originally Posted By Rae
I have another question that just came up at my FI. Does beneficial ownership apply to an escrow account for a corporation? Since we never see the actual owner of said account...(this one is set up by a title company). Appreciate any guidance you may offer.


The "actual owner" of the account is the corporation. The beneficial owner of the funds in the account is the title company's client.
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#2196959 - 10/31/18 06:52 PM Re: Benefical Ownership on an Association RVaughn, CAMS
ramblings Offline
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Another question... Are non-profits required to register? I know that most churches, for example, are not registered and we have a number of social clubs (like bowling leagues) which are also not registered. However, I am getting some push back on an account for the requirements who is a "non-profit organization" and attempted to register in another state. So, I got to wondering if other non-profits (like Goodwill/Salvation Army/Make-A-Wish etc.) are required to comply with the ownership prong because they are registered?

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#2196961 - 10/31/18 07:05 PM Re: Benefical Ownership on an Association RVaughn, CAMS
BrianC Online
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Only the control prong applies to non-profits if they are registered within a state. Registration requirements will vary by state law so I can opine on that.

For unregistered entities such as civic club, your existing CIP procedures should already extend to the signers of those accounts and beneficial ownership simply does not apply.
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#2196967 - 10/31/18 07:25 PM Re: Benefical Ownership on an Association RVaughn, CAMS
praBSA Offline
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Agree ^ As for Non-profits and registration, you will find different responses based on jurisdiction. There are very LIMITED/few situations in which I personally have seen the IRS give 501(c)(3) status too an entity that wasn't registered as a corporation.

With that said, in New York, churches can register with the state or locally, their choice.

Yes, control prong only for NFPs, unless they are a for-profit church, then both prongs.

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#2196995 - 10/31/18 08:31 PM Re: Benefical Ownership on an Association RVaughn, CAMS
BrianC Online
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Remember that the FinCEN FAQs specifically note that an entity does not have to be a 501(c)(3) to be considered non-profit for the purpose of beneficial ownership. The IRS status only means that donations are tax deductible.

A "for-profit" church wouldn't be an NFP would it? wink
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#2197016 - 11/01/18 11:54 AM Re: Benefical Ownership on an Association RVaughn, CAMS
praBSA Offline
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Correct. However, in my short career, I have yet to see a company claiming to be NFP without 501(c)(3) status. Not-for-profit definitions are defined on the individual state level, not by the IRS, therefore you can have one without the other, but from my experience, that is rare.

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#2197023 - 11/01/18 01:04 PM Re: Benefical Ownership on an Association praBSA
Elwood P. Dowd Offline
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Incorporation is not a condition precedent to non profit status from the IRS.

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#2197026 - 11/01/18 01:47 PM Re: Benefical Ownership on an Association RVaughn, CAMS
praBSA Offline
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Hence the words "very few"....

"In order to qualify as a 501(c)(3) organization, the organization must be in the proper legal form. The organization must be organized as a trust, corporation or association under its state's laws and be capable of providing proof of such to the IRS. Proof of proper legal formation includes presenting a federal tax identification number (EIN) and the organization's formation documents (.g., articles of incorporation) to the IRS."

The IRS requires 3 tax years of operation and proper financials to issue a 501(c)(3) therefore, yes, entities will exist as NFPs before they can obtain tax exempt (501(c)(3)) status.

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#2197029 - 11/01/18 02:02 PM Re: Benefical Ownership on an Association praBSA
Elwood P. Dowd Offline
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"Very few" could only be accurate observation if it were bounded by your experience. There are thousands and thousands of unincorporated non profit organizations in the U.S.

The proposed beneficial ownership regulation was going to introduce non profit status as an issue, but it was shouted down during the comment period; it is nothing but a red herring here. The customer is a registered legal entity under state law or it isn't. If it isn't, then the regulation does not apply.
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#2197039 - 11/01/18 02:27 PM Re: Benefical Ownership on an Association RVaughn, CAMS
praBSA Offline
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Correct. The question posed was whether a NFP needed ownership filled out on the COBO form. The simple answer is no IF registered but you still need control. If not registered, nope.

Yes, I am bounded by my experience. In the past, working at a major bank, we wouldn't take the customer's word they were a NFP just because they told us so, we wanted to see their 501(c)(3) paperwork or their financials as they were ultimately reviewed differently under a separate set of procedures. In the end, however you verify they are a NFP is up to you and your risk tolerance.

I'm not a national state law expert or anything but I would assume some states would require a NFP to legally register their entity in some capacity with the state. It still boggles my mind why anyone would pursue any joint venture even for charitable purposes without the protection of some sort of legal entity, the exposure to liability these days with the "sue everyone" mentality can cause some major personal liability issues. But alas, that is a discussion for another topic.

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