OVERVIEW OF CORPORATE TRANSPARENCY ACT
The recently passed Corporate Transparency Act (CTA), enacted as part of the National Defense Act, mandates millions of entities to begin reporting their beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). The CTA is not a part of the tax code, but rather, a part of the Bank Secrecy Act with reports filed to FinCEN rather than the IRS. This additional requirement will require additional planning with your attorney or legal counsel.
On November 29, 2023, the Financial Crimes Enforcement Network (FinCen) released in the Federal Register final regulations which extended the filing deadline for entities created or registered on or after January 1, 2024, and before January 1, 2025 from 30 days to 90 days. The reporting deadlines for both entities created on or after January 1, 2024 and any subsequent changes remain unchanged.
WHO IS REQUIRED TO REPORT?
All domestic and foreign entities that have filed formation or registration documents with a U.S. state (or Indian tribe) are required to file, unless they meet an exception, including the following:
Large operating entities that employ more than 20 people in the U.S., had more than $20m of receipts on prior year tax return, and have a physical presence in the U.S.;
Publicly traded companies registered under Section 102 of SOX;
Tax-exempt entities; or,
Any other entities described in the full list of exemptions – Question No. 8 of FinCen FAQs.
WHO MUST BE INCLUDED IN THE REPORT?
Beneficial Owners
Any individual who directly or indirectly exercises substantial control of the company, or
Any individual who owns or controls at least 25% of the company’s interest.
Company applicants, only for entities created after Jan 1, 2024
The person or persons who directly file(s) or is(are) responsible for filing the BOI report and the company’s first registration document.
WHAT MUST BE REPORTED?
The following information must be reported for the company and for each beneficial owner or company applicant:
All parties: Legal name, U.S. Address, ITIN, FinCen Identifier
Company Only: Jurisdiction of Formation
Beneficial Owners & Company Applicants Only: Date of Birth and Image of Identification (i.e. Passport or Driver’s License)
WHEN ARE REPORTS DUE?
If your entity was created/registered:
Prior to Jan 1, 2024: Initial report due by Jan 1, 2025.
On or after Jan 1, 2024: Initial report due within 90 days of creation/registration.
Following filing of initial report, any change to any information on an initial or subsequent BOI report must be reported within 30 days of change.
WHAT ARE PENALTIES FOR NONCOMPLIANCE?
Penalties may include:
Civil penalties of up to $500/day of non-compliance, and
Criminal penalties of a $10,000 fine and/or two years of imprisonment.
Please contact your attorney or other legal counsel if you have questions regarding the applicability of the CTA’s reporting requirements and/or issues surrounding the collection of relevant ownership information. Otherwise, please refer to the Beneficial Ownership Information Reporting website made available via the Financial Crimes Enforcement Network.
