Corporate Transparency Act Filing Requirements Begin in 2024
Note: The following information is an overview of the new reporting requirements established by the Corporate Transparency Act and is being provided solely for general information purposes. Please see the discussion at the end of this letter explaining the legal limitations to Thompson, Derrig & Craig, P.C. providing services related to this law.
On January 1, 2024, the Corporate Transparency Act (“CTA”, “Act”) was enacted as part of the National Defense Authorization Act. The CTA was implemented to assist U.S. law enforcement agencies in combatting financial crimes such as money laundering, terrorism financing, and other illicit activity. The Act requires certain entities to report company and beneficial ownership information to the Financial Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Treasury Department. The collected information will be maintained by FinCEN in a database and under certain circumstances may be disclosed to U.S. federal regulatory agencies, other federal, state, local, or tribal agencies, or certain financial institutions.
Both domestic and foreign “reporting companies” are required to comply with the CTA. Domestic corporations, limited partnerships, limited liability companies, and other business entities that were created by filing documents with a secretary of state or other similar office under the laws of a U.S. state or Indian tribe are considered reporting companies. Business entities organized under the laws of a foreign country that registered to do business in a U.S. state or tribal jurisdiction by filing documents with a secretary of state or other similar office are also considered reporting companies.
Although the CTA has a potentially broad application, the Act provides for several exceptions to the general reporting requirements. The CTA provides exemptions for 23 types of entities, many of which are already regulated by governmental authorities. The exempt entities include, but are not limited to, publicly traded companies, inactive entities, accounting firms, banks, credit unions, security brokers and dealers, certain tax-exempt entities, insurance companies, public utilities, and governmental authorities. You can review the full list of exemptions and qualifications here: https://www.fincen.gov/boi-
Any entity that does not qualify for an exemption must file a report with FinCEN that discloses its full legal name, any trade name or DBA name, business address, jurisdiction of its formation or registration, and taxpayer identification number. The entity must also disclose each beneficial owner that either exercises substantial control over the entity or owns or controls at least 25% of its ownership interests. The information required to be disclosed for each beneficial owner includes an individual’s legal name, date of birth, residential address, and identifying number from an unexpired passport, driver’s license, or state identification document. The last item must be accompanied by an image of the applicable document.
Existing companies formed or registered before January 1, 2024, must file an initial report no later than January 1, 2025. Companies formed or registered on or after January 1, 2024, must file an annual report within 90 calendar days of their formation or registration date. If there is a change to the previously filed information regarding the reporting company or a beneficial owner, the reporting company must file an updated report within 30 calendar days after the date of the change. There is no annual reporting requirement. Failure to comply with the CTA reporting requirements may result in civil penalties of up to $10,000 and criminal sanctions of up to 2 years imprisonment. You can file your report on the FinCEN website here: https://www.fincen.gov/boi
Note that the CTA is a provision under Title 31 (Money and Finance) of the United States Code rather than Title 26 (Internal Revenue Code). Under applicable regulatory authority, accountants have been granted limited authority only to interpret tax law under Title 26. At this time, it is not clear whether accountants have the requisite authority to similarly interpret Title 31. Accordingly, services regarding the CTA may constitute the “practice of law” and should be provided only by individuals or firms that are licensed to practice law under the applicable laws of a U.S. state.
Therefore, Thompson, Derrig & Craig, P.C. is unable to provide technical advice regarding the CTA or to prepare any reports required by the CTA. We recommend that you contact your legal counsel to discuss the CTA and any respective reporting obligations that you may have under the Act.