Each November, estate planners typically focus on year-end planning strategies and urging clients to implement long-discussed plans. This year, planners are thinking a lot about the new Corporate Transparency Act (CTA). Beginning on January 1, 2024, the CTA requires “reporting companies” to report “beneficial ownership information” (BOI) to the Financial Crimes Enforcement Network (FinCEN).
Reporting companies can be domestic or foreign. A domestic reporting company is any entity that is a corporation, LLC or created by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe. A foreign reporting company is any entity that is a corporation, LLC or other entity formed under the law of a foreign country and registered to do business in any State or tribal jurisdiction by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe. There are 23 categories of entities that are exempt from filing BOI reports.
A beneficial owner is any individual who, directly or indirectly, either exercises substantial control over, or owns or controls at least 25 percent of the ownership interests of, a reporting company. Reporting companies formed or registered after January 1, 2024 must also report information about a “company applicant,” which is the person who creates (in the case of a domestic reporting company) or registers (in the case of a foreign reporting company) the reporting company or directs or controls such creation or registration.
Existing reporting companies must file their initial BOIs with FinCEN by January 1, 2025. Those created or registered after January 1, 2024 have 30 days after receiving notice of their creation or registration to file their initial reports (although FinCEN has proposed extending this deadline to 90 days for reporting companies created in 2024. (Federal Register :: Beneficial Ownership Information Reporting Requirements)
The CTA has wide ranging applicability and likely will have a large impact. Stay tuned for a more complete advisory delving deeper into this game-changing legislation. In the meanwhile, below are additional helpful links (including one warning of scammers who have tried to use the CTA to wheedle information out of unsuspecting people and entities).
Federal Register – Beneficial Ownership Information Reporting Requirements (Beneficial Ownership Information Reporting Rule Fact Sheet | FinCEN.gov)
Beneficial Ownership Information Reporting Rule Fact Sheet (https://lnkd.in/g7DXaUG9)
Reference Materials (Beneficial Ownership Information Reporting | FinCEN.gov)
Beneficial Ownership Information Reporting (https://www.fincen.gov/boi)
Thank you David Goldstein for this week’s Tax Tracker!