A new law intended to help prevent and combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity will affect millions of American businesses when it goes into effect on January 1, 2024. Broadly speaking, new regulations created as part of the Corporate Transparency Act require most existing and new corporate entities in the United States to file reports with the federal Financial Crimes Enforcement Network (FinCEN), including: the business name, current address, state of formation and EIN of each entity, as well as the name, birth date, address and government issued photo ID (such as a driver’s license or passport) of every direct or indirect Beneficial Owner of the entity.
These sweeping requirements will apply to any domestic or registered foreign entity that is a corporation, a limited liability company, or otherwise created by the filing of a document with a secretary of state or similar office. Exceptions include:
- SEC-reporting companies
- Regulated financial services companies, including banks, credit unions, depository institution holding companies, registered securities broker-dealers, registered investment companies and investment advisers, venture capital fund advisers, and pooled investment vehicles that are operated or advised by the foregoing
- Insurance companies
- PCAOB-registered accounting firms
- Certain tax-exempt entities
- Inactive entities that existed before January 1, 2020, are not engaged in active business, are not owned by a foreign person, have not had a change in ownership in the last 12 months, have not sent or received funds greater than $1,000 in the last 12 months, and do not hold any assets
- Subsidiaries of certain exempt entities
There is also an exemption for entities that employ more than 20 full-time employees in the U.S., have an operating presence at a physical office in the U.S., and demonstrate more than $5 million in gross receipts or sales on their federal income tax return (excluding receipt/sales from sources outside the U.S.) If a company falls below these thresholds in the future, a report must be filed within 30 days. An updated report is required if a reporting company later becomes eligible for the exemption.
ShindelRock tax professionals will keep abreast of these new regulations and urge business owners to be aware of the new reporting requirements in 2024 and beyond. Contact your ShindelRock tax professional for more information.
