Important Update
IMPACT OF ONGOING LITIGATION – DEADLINE STAY – VOLUNTARY SUBMISSION ONLY
Please be advised that on December 3, 2024 the US District Court for the Eastern District of Texas entered a preliminary injunction enjoining the Corporate Transparency Act (CTA) and its enforcement nationwide. The U.S. Department of Justice, acting on behalf of the Treasury Department, filed a notice of appeal to the Fifth Circuit on December 5, 2024.
FinCEN has responded to the preliminary injunction by informing reporting companies that they are not required to file beneficial ownership information and are not subject to liability if they fail to do so while the preliminary injunction remains in force. FinCEN has also indicated that reporting companies may continue to voluntarily report their beneficial ownership information to FinCEN during the pendency of the preliminary injunction.
It is not clear how quickly the appeal will proceed or how much time will be allotted to reporting companies to again comply with their CTA reporting requirements if the preliminary injunction were to be lifted or overturned. Please consult with an attorney if you have questions about the impact of this litigation and for advice specific to your situation.
As of January 1, 2024, many business entities and some trusts are required to report beneficial ownership information (BOI) to the U.S. government under the new Corporate Transparency Act (CTA).
The CTA is meant to help combat terrorism, money laundering, tax abuse, and other financial crimes.
New and existing business entities that meet the CTA’s definition of a Reporting Company and that do not fall under any exemptions, will need to file information about the entity and the individuals who own and/or control the entity, with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) – through an online form available at https://www.fincen.gov/boi.
Entities created on or after January 1, 2024, will also need to submit information on company applicants.
Do the CTA reporting requirements apply to my business entity?
Entities should determine if the CTA and the new reporting requirements apply to them. The CTA applies to certain existing and new domestic and foreign corporations, LLCs, LLPs, LLLPs, most limited partnerships, and other business entities – including any entity that is created or registers by filing a document with the Secretary of State or a similar state agency. Entities required to report are called Reporting Companies.
The CTA exempts 23 types of entities that may fall under the definition of a Reporting Company. Large operating businesses that employ more than 20 full-time employees, have a physical office in the United States and have annual revenues of more than $5 million fall within one of the 23 exceptions. Many financial institutions, insurance companies, certain inactive entities, certain non-profit organizations and tax-exempt entities, and governmental authorities are exempt.
My business entity needs to comply with the CTA: What beneficial ownership information will I need to report to FinCEN?
Beneficial ownership information includes:
- Full name
- Residential address
- Birthdate
- FinCEN Identification number or other acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction of the identification document. An image of the document must also be submitted.
When do I need to submit beneficial ownership information?
Entities formed on or after January 1, 2024, will need to report BOI and company applicant information within 90 days of the entity’s formation date. On and after January 1, 2025, new entities will need to report within 30 days of the entity’s formation date.
Entities formed prior to January 1, 2024, will have until January 1, 2025 to report BOI.
Please note that the obligation to report BOI will be an ongoing requirement, which means if the Reporting Company or a beneficial owner changes their name or residential address, the BOI needs to be updated with FinCEN.
Businesses and their controlling owners who are required but fail to report complete or updated BOI or who report false or fraudulent information can face significant civil penalties of up to $500 per day and/or criminal penalties of up to $10,000 in fines and/or imprisonment of up to 2 years.
FinCEN Resources
For more information, please access the resources provided on the FinCEN website.
Contact Us
Monroe Moxness Berg has formed a committee to track the CTA and related developments and is helping clients navigate this new law. If you would like assistance, please reach out to John Remakel at [email protected] or Monica Pelkey at [email protected], or the MMB attorney you regularly work with.