Beginning January 1, 2024, the Corporate Transparency Act will require millions of U.S. companies to file first-time beneficial ownership information reports with the U.S. Department of Treasury Financial Crimes Enforcement Network (FinCEN).

What is the Corporate Transparency Act

The Corporate Transparency Act (CTA) was initially signed into law in early 2021 as part of the Anti-Money Laundering Act of 2020. The CTA authorized the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) to collect beneficial ownership information and disclose it to authorized government authorities and financial institutions to assist the federal government in pursuing financial crimes, subject to effective safeguards and controls.

When does the CTA start

• New entities (created/registered after December 31, 2023) – must file within 30 days
• Existing entities (created/registered before 2024) – must file no later than January 1, 2025
• Reporting companies that have changes to previously reported information or to correct inaccuracies in prior-filed reports – must file within 30 days.

Reporting companies will be required to file beneficial ownership information (BOI) reports to FinCEN generally using the FinCEN online portal (www.fincen.gov/boi).   The information reported includes information about the entity itself and two categories of individuals: (1) beneficial owners and (2) company applicants.

A reporting company is broadly defined as any corporation, limited liability company, or other similar entity created by filing a document with the secretary of state or similar office in any state or territory or with a federally recognized Indian Tribe or formed under the laws of a foreign country and registered to do business in the United States.

Who doesn’t need to file

Certain entities are exempt from reporting, including banks, credit unions, accounting firms, and “large” operating companies (i.e., more than 20 full-time employees AND $5 million in gross receipts or sales on the entity’s prior year tax return).

Reporting requirements

Reporting companies will be required to share the legal name, trade name, DBA, taxpayer ID, and street address.

Beneficial owners will have to report their name, date of birth, residential street address, and valid state-issued photo ID (i.e., Driver’s License or passport). The corporate street address for beneficial owners may NOT be used.

Who can see the data

Beneficial ownership information submitted via the Act’s portal will not be publicly available.  Instead, the information will only be available to:

• The Federal Crimes Enforcement Network (FinCEN)
• Certain other law enforcement agencies with court approval
• Non-US law enforcement agencies, i.e., foreign governments
• Financial institutions and regulators with the consent of the reporting company

Cost to file

There is no user fee or registration fee assessed.

Penalties for not filing

Willful reporting violations carry a $500 per day civil penalty; criminal violations are up to $10,000, or two years in prison. Unauthorized disclosure or use carries civil fines of $500 per day and criminal penalties of up to $250,000 or five years in prison or both. The fines start at $500 a day, up to $250,000 per day if the government finds you are trying to perpetrate a fraud.

At this time we believe the company’s legal counsel should be contacted regarding CTA reporting in part because they may be deemed the company applicant.  We will follow up with more information on this topic as we receive further FinCEN guidance.