Beneficial Ownership for Schools

In this Compliance Clip (video), Adam discusses how the beneficial ownership rules apply to schools and school corporation. Surprisingly, the application isn’t as simple as you might think.

The following is a transcript of this video:

“This Compliance Clip is going to focus on how the beneficial ownership rules apply to schools and school corporations.  Of course, the answer is going to depend upon the type of school or School Corporation we are dealing with. So, let’s take a look at the beneficial ownership rules for whether they are a for-profit school, a non-profit school, or a public entity.  Now, if we have a for-profit school there are no exemptions or exclusions and the full beneficial ownership rules apply. In other words, you're going to treat a for-profit school just like any other business because it is a for-profit corporation and, therefore, there are no exemptions whatsoever, meaning you have to do the full beneficial ownership verification.

If the school is a non-profit school, what we have to determine is how the partial exemption applies by determining if this is an actual nonprofit corporation or an unincorporated association.  Typically, a school is going to be a non profit corporation, so in this case, the nonprofit is going to have the control prong be applicable.

If the school corporation or school - on the other hand - is a public entity like a public school, then the government exclusion is going to apply.   Under the government exclusion it says “any entity established under the laws of the United States of any state or of any public subdivision of any state or under in interstate compact between two or more states that exercises government authority on behalf of the United States or in any such state or political subdivision.”

In other words, if your school corporation has the ability to tax then they are going to be exempt from beneficial ownership rule requirements as well as CIP and other BSA requirements.   

The bottom line is that when you were dealing with a school and whether or not the beneficial ownership requirements apply, we have to understand what type of entity were dealing with.  Are we dealing with a for-profit entity, a nonprofit entity - and if it's an unincorporated association for whatever reason that would be different rules than for a nonprofit corporation - and also is it a public entity (which would fall under the government exclusion)? So, that is how we deal with schools and school corporations for beneficial ownership requirement.”