CTA Filing Reminder

The Corporate Transparency Act (“CTA”) was enacted January 1, 2021, as part of the National Defense Authorization Act, representing the most significant reformation of the Bank Secrecy Act and related anti–money laundering rules since the U.S. Patriot Act. The CTA is intended to address and guard against money laundering, terrorism financing, and other forms of illegal financing by mandating certain entities (primarily small and medium size businesses) to report “beneficial owner” information to the Financial Crimes Enforcement Network (“FinCEN”).

The CTA authorizes FinCEN, a bureau of the U.S. Treasury Department, to collect, protect, and disclose this information to authorized governmental authorities and to financial institutions in certain circumstances.

Our firm is sending you this communication to provide you with some general information regarding the new reporting rules as well as initial steps you should take to address the implications of the CTA to your organization.

What entities are subject to the new CTA reporting requirements?

Entities required to comply with the CTA (“Reporting Companies”) include corporations, limited liability companies (LLCs), and other types of companies that are created by a filing with a Secretary of State (“SOS”) or equivalent official. The CTA also applies to non-U.S. companies that register to do business in the U.S. through a filing with a SOS or equivalent official. Since the definition of a domestic entity under the CTA is extremely broad, additional entity types could be subject to CTA reporting requirements based on individual state law formation practices.

Phase-in of reporting requirements

As currently promulgated, the CTA’s reporting requirements will be phased-in in two stages:

All new Reporting Companies — those formed (or, in the case of non-U.S. companies, registered) on or after January 1, 2024 — must report required information within 90 days after their formation or registration.

All existing Reporting Companies — those formed or registered before January 1, 2024 — must report required information no later than January 1, 2025.

Take immediate action now!

As the CTA is not a part of the tax code, the assessment and application of many of the requirements set forth in the regulations, including but not limited to the determination of beneficial ownership interest, necessitate the need for legal guidance and direction. As such, since we are not attorneys, our firm is not able to provide you with any legal determination as to whether an exemption applies to the nature of your entity or whether legal relationships constitute beneficial ownership, nor can we file on your behalf.

We strongly encourage you to reach out as soon as possible to legal counsel with expertise in this area to assist your organization with the steps you need to take to ensure compliance with the CTA, if applicable. Note that penalties for willfully violating the CTA’s reporting requirements include (1) civil penalties of up to $500 per day that a violation is not remedied, (2) a criminal fine of up to $10,000, and/or (3) imprisonment of up to two years.