The Corporate Transparency Act
The Corporate Transparency Act (“CTA”) and its implementing regulations (“FinCEN Regulations”) became effective on January 1, 2024. As a result, certain reporting companies are required to disclose information, including information about their beneficial owners, to the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”).
The CTA is being challenged in various judicial arenas. On March 1, 2024, the U.S. District Court of the Northern District of Alabama declared that the CTA was unconstitutional and permanently enjoined the enforcement of the CTA against the plaintiffs in that action. The CTA remains enforceable against all others. Nevertheless, on March 1, 2024, FinCEN confirmed that it would continue to enforce the CTA against any company required to make disclosures under the CTA and not covered by the court’s order.
Frequently asked questions regarding pertinent provisions of the CTA and the FinCEN Regulations are set out below. The information provided below is not exhaustive, as the CTA and the FinCEN Regulations are extensive. For more information, please visit https://www.fincen.gov/boi-faqs (FAQs), https://www.fincen.gov/boi/small-entity-compliance-guide (Small Entity Compliance Guide), or reach out to our Firm.
Why was the CTA enacted?
The CTA (and the FinCEN Regulations) are designed to enable FinCEN to identify individuals that own or exercise control of entities doing business in the United States. The intention is to combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity. Entities subject to the CTA must file a Beneficial Ownership Information Report (“BOI Report”) within the timeframes set out in the CTA.
Which entities are subject to the CTA?
Corporations, limited liability companies, limited partnerships, statutory trusts, LLPs, LLLPs, and other entities that are created by the filing of a document with a secretary of state or similar office of a U.S. state or tribal jurisdiction are subject to the CTA. As presently written, this includes homeowners’ associations, condominium associations, and similar entities that were formed by the filing of a document with a secretary of state or similar office, unless they otherwise qualify for an exemption. Foreign entities that are registered to do business in the U.S. are also subject to the CTA. All of the foregoing are referred to as “Reporting Companies.”
Are any entities exempt from the CTA’s filing requirements?
There are 23 types of entities that are exempt from filing a BOI Report. In general, specific requirements must be met to qualify for exemption. See Exhibit A attached for a list of the exemption short titles. Companies should review the list and the specific requirements carefully to confirm that an exemption applies. The list is also found at Chapter 1.2 of the Small Business Compliance Guide.
See https://www.fincen.gov/boi/small-entity-compliance-guide.