New CTA reporting requirements affecting millions coming January 1, 2024

As we shared in June, the new federal Corporate Transparency Act (CTA), intended to help prevent and combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity, takes effect on January 1, 2024.  This new Act will affect most American businesses, as well as any domestic or registered foreign entity that is a corporation, a limited liability company (LLC), or otherwise created by the filing of a document with a secretary of state or similar office. Non-business owners who hold assets through an entity formed at the state level (such as personal real estate held in an LLC), or who are an officer in a company, will also be impacted.

An entity that meets the filing requirements (a reporting entity) is required to report specific Beneficial Ownership Information (BOI), and upload certain identification documents, for any “beneficial owner.” A beneficial owner includes any individual who directly or indirectly owns or controls at least 25% or can exercise “substantial control.”  Certain entities are exempt from filing, including certain tax-exempt entities, certain inactive entities, and “large operating entities.”

The due date for filings depends on the date the entity was formed, as follows:

  • Entities registered on or before 12/31/23 – due date is 1/1/2025
  • Entities registered between 1/1/24 and 12/31/24 – due date is 90 days after formation
  • Entities registered on or after 1/1/2025 – due date is 30 days after formation
  • Change in any prior reported information – due date is 30 days of the change

The CTA comes with several definitions and involves not only a legal analysis of the law but also an analysis of an entity’s governing instruments and the roles of those associated with the entity. There are also significant civil and criminal penalties associated with unfiled, late, incomplete, or inaccurate reports. Penalties include fines up to $10,000 per violation and imprisonment for up to two years for each felony conviction.

Although it may appear straightforward for even single-owner entities, we encourage you to seek advice from legal counsel as soon as possible to determine if you have a reporting requirement and to what extent.  The reports can only be filed electronically through the Financial Crimes Enforcement Network (FinCEN), and requires personal identifying information and a copy of a government-issued photo ID.  Some attorneys have created online filing portals to assist with compiling the reporting data, uploading required documentation, and filing the report. These portals permit each Beneficial Owner to upload their personal information and associated documentation into a secure “locker” where it cannot be seen or accessed by any other owners or persons associated with the reporting company.

The form to report beneficial ownership information is not yet available. Once available, information about the form will be posted on FinCEN’s beneficial ownership information webpage.  For additional information, please visit the FinCEN website or review the FAQs.

ShindelRock tax professionals will keep abreast of these new regulations and urge business owners to take steps as soon as possible to address the new BOI reporting requirements. Contact your ShindelRock tax professional for more information.