The CORPORATE TRANSPARENCY ACT (CTA) What you should know at a glance

Man looking at money in briefcase

JGB January 2024 Newsletter

The Corporate Transparency Act (CTA) was enacted in January 2021 under the National Defense Authorization Act. It creates requirements for certain “Reporting Companies” to file a Beneficial Ownership Information Report (BOIR) with FinCEN (Financial Crimes Enforcement Network) a bureau of the U.S. Treasury under the Secretary for Terrorism and Financial Intelligence. Per FinCEN’s website (https://www.fincen.gov), the bureau exists to “safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.”

Why does this exist?

This legislation is part of the U.S. government’s efforts to thwart the use of shell companies or other opaque ownership structures for money laundering, tax evasion, cyber crime, and funding terrorism, and other illicit activities and is intended to bring the United States closer to international standards in these areas.

Who needs to report?

In short, starting January 1, 2024, any entity that meets the definition of a “Reporting Company” must file a BOIR with FinCEN disclosing the Beneficial Owners of the Reporting Company. Reporting Companies include corporations, LLCs, LPs, LLPs, Business Trusts or similar entities. Basically, if the entity is created by filing a document with the secretary of state or any similar office under the law of a State or Indian Tribe, it will be considered a Reporting Company for purposes of the CTA.However, there are exemptions. The biggest of these exemptions are publicly traded companies and those defined as a Large Operating Company, which is a company with more than 20 employees in the US, has US gross receipts or sales over $5,000,000 and is physically present in the US.

What about Revocable Living Trusts?

Since Revocable Living Trusts are not entities that are created by filing a document with the secretary of state or any similar office under the law of a State or Indian Tribe, they are not considered to be Reporting Companies for purposes of the CTA. However; Trusts that are the beneficial owners of a Reporting Company may be required to have information included about the trust disclosed in the BOIR to FinCEN.

What’s in a report?

The BOIR requires disclosure about the details of the Beneficial Owners of a Reporting Company. Beneficial Owners are any individual who directly or indirectly through any contract, arrangement, understanding or relationship: 1) exercises substantial control over the Reporting Company, or 2) owns at least 25% of the Reporting Company, or 3) Controls ownership of at least 25% of the Reporting Company. The BOIR will include information identifying the Beneficial Owner’s name, address, and a form of government approved identification must be uploaded into the system. Said BOIR can be made electronically at https://boiefiling.fincen.gov

WATCH OUT FOR POTENTIAL SCAMS:

FinCEN has issued the following alert

“FinCEN has been notified of recent fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the Corporate Transparency Act. The fraudulent correspondence may be titled "Important Compliance Notice" and asks the recipient to click on a URL or to scan a QR code. Those e-mails or letters are fraudulent. FinCEN does not send unsolicited requests. Please do not respond to these fraudulent messages, or click on any links or scan any QR codes within them.”

Deadlines:

Reporting Companies that are created or registered on or after January 1, 2024, and before January 1, 2025, have 90 calendar days to make their BOIR after receiving actual or public notice of the effective date their entities creation or registration with the secretary of state or any similar office under the law of a State or Indian Tribe. For Reporting Companies that were in existence before January 1, 2024, the deadline to file the BOIR is January 1, 2025. If there is a change in beneficial ownership of a Reporting Company, then an updated BOIR must be submitted within 30 days of the change

Penalties:

The penalties for a CTA violation are should not be ignored. Under 31 USC §5336(h) and 31 CFR §1010.380(g): Willfully providing or attempting to provide false or fraudulent beneficial ownership information; or willfully failing to report, complete or update beneficial ownership information is subject to a monetary penalty of $500 per day up to a maximum of $10,000 and possible imprisonment for up to two years.

The CTA is here and it is real. It imposes duties on Reporting Companies (often small businesses) that must be adhered to. The federal government is using the CTA to combat money laundering and financial support provided for terrorism. You can find more information, including FinCEN’s Small Entity Compliance Guide in the Small Business Resources section of FinCEN’s BOI website (https://www.fincen.gov/boi). Be certain to know your obligations and to make accurate BOIR filings for Reporting Companies detailing their Beneficial Owners to avoid violating the CTA and becoming subject to its penalties thereunder. Do not hesitate to schedule an appointment with your JGB attorney should you have additional question and/or concerns.

TrustGuard™ 2024

TrustGuard™ enrollment for 2024 is now open. TrustGuard™ is a JGB proprietary, process-driven program designed for our clients who are serious about protecting their investment in their Trust-based Estate Plan with an annual review.

A subscription to TrustGuard™ includes: an annual review of your estate plan and trust funding assistance for the enrollment year, any required changes to your plan, access to our exclusive TrustGuard™ quarterly newsletter, and an invitation to our annual TrustGuard™ appreciation event. Clients who are eligible for TrustGuard™ are those who are renewing their TrustGuard™ membership and new clients who executed their trust documents in 2023.

Enrollment for the 2024 TrustGuard™ period ends on February 28, 2024. JGB clients who do not re-enroll during the enrollment period will not have another opportunity to become members of TrustGuard™.

Participation in TrustGuard™ is entirely voluntary. The TrustGuard™ enrollment subscription is billed at an annual flat rate. Clients who pay their enrollment in full prior to February 1, 2024 will receive a $100 discount off of the price of full enrollment. A separate email with enrollment form was sent on December 1st, 2023, to all eligible clients.

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