Corporate Transparency Act - Beneficial Ownership Information Reporting Requirement

 

Bunting, Tripp & Ingley, LLP

Certified Public Accountants

A Tradition of Excellence Since 1926

January 1, 2024

RE: Corporate Transparency Act - Beneficial Ownership Information Reporting Requirement

Dear Client,

Starting January 1, 2024, a significant number of businesses will be required to comply with the Corporate Transparency Act (CTA). The CTA was enacted into law as part of the National Defense Act for Fiscal Year 2021 . The CTA requires the disclosure of the beneficial ownership information ( otherwise known as "BOi") of certain entities from people who own or control a company.

It is anticipated that 32.6 million businesses will be required to comply with this reporting requirement. The intent of the BOI reporting requirement is to help US law enforcement combat money laundering, the financing of terrorism and other illicit activity.

The CTA is not a part of the tax code. Instead, it is a part of the Bank Secrecy Act, a set of federal laws that require record-keeping and report filing on certain types of financial transactions. Under the CTA, BOI reports will not be filed with the IRS, but with the Financial Crimes Enforcement Network (FinCEN), another agency of the Department of Treasury.

Below is some preliminary information for you to consider as you approach the implementation period for this new reporting requirement. This information is meant to be general-only and should not be applied to your specific facts and circumstances without consultation with competent legal counsel and/or other retained professional adviser.

What entities are required to comply with the CTA's BOI reporting requirement?

Entities organized both in the U.S. and outside the U.S. may be subject to the CTA's reporting requirements. Domestic companies required to report include corporations, limited liability companies (LLCs) or any similar entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.

Domestic entities that are not created by the filing of a document with a secretary of state or similar office are not required to report under the CTA.

Foreign companies required to report under the CTA include corporations, LLCs or any similar entity that is formed under the law of a foreign country and registered to do business in any state or tribal jurisdiction by filing a document with a secretary of state or any similar office.

Are there any exemptions from the filing requirements?

There are 23 categories of exemptions. Included in the exemptions list are publicly traded companies, banks and credit unions, securities brokers/dealers, public accounting firms, tax-exempt entities and certain inactive entities, among others. Please note these are not blanket exemptions and many of these entities are already heavily regulated by the government and thus already disclose their BOI to a government authority.

In addition, certain "large operating entities" are exempt from filing. To qualify for this exemption, the company must:

  • Employ more than 20 people in the U.S.;

  • Have reported gross revenue (or sales) of over $5M on the prior year's tax return; and

  • Be physically present in the U.S.

When must companies file?

There are different filing timeframes depending on when an entity is registered/formed or if there is a change to the beneficial owner's information.

  • New entities ( created/registered in 2024) - must file within 90 days

  • New entities ( created/registered after 12/31/2024) - must file within 30 days

  • Existing entities (created/registered before 1/1/24) - must file by 1/1/25

  • Reporting companies that have changes to previously reported information or discover inaccuracies in previously filed reports - must file within 30 days

How do you file the BOI Report?

BOI reports must be filed electronically. FinCEN's e-filing portal, available at https://boiefiling.fincen.gov/, provides two methods to submit a report: (1) by filling out a web-based version of the form and submitting it online, or (2) by uploading a completed PDF version of the BOI report. Some third-party service providers like Legal Zoom, File Forms or CorpNet and others offer the ability to file the BOI report through their software. The person who submits the BOI report will need to provide their name and email address to FlnCEN. There is no fee for filing the report.

Risk of non-compliance

Penalties for willfully not complying with the BOI reporting requirement can result in criminal and civil penalties of $500 per day and up to $10,000 with up to two years of jail time.

We will not be filing these reports on your behalf so we encourage you to visit the FINCEN website at https://www.fincen.gov/boi for further information or talk with your attorney.

Sincerely,

Bunting, Tripp & Ingley, LLP

Certified Public Accountants