As of January 1, 2024, the bipartisan Corporate Transparency Act, enacted in 2021 to curb illicit finance, requires many companies doing business in the United States to report information to the Financial Crimes Enforcement Network (FinCEN) about the individuals who ultimately own or control them. FinCEN is a bureau of the U.S. Treasury Department.

The Corporate Transparency Act requires detailed reporting and updating of personal information by reporting companies, “beneficial owners” and company applicants into an online federal data bank that will be overseen by the Dept of Treasury.  The goal is to combat terrorism, money laundering, tax fraud, and the like.  The information must be reported by January 1, 2025.

Corporate Transparency Act can be a chore; however, it is reasonably straightforward to complete.  https://boiefiling.fincen.gov/fileboir

The general exception to reporting is (1) more than 20 employees, (2) more than $5 million in gross receipts or sales, (3) operating presence in the US.

If you own multiple entities, a BOI must be reported for each entity.

What to expect when filing out form

Reporting companies must include items like:

• Full legal name of company
• DBA and trade names
• Jurisdiction information
• EIN of company
• Complete address
• Information about beneficial owners

“Beneficial Owners”

“Beneficial Owners” (who are individuals, not companies) must also be identified in the report.  “Beneficial Owners” is a bit of a vague term.  It includes someone that either exercises “substantial control” or owns or controls at least 25% of the company.  Also includes someone who receives substantial economic benefits.  Generally, this would include senior officers, people that can appoint or remove officers, and people with influence over the important decisions.

A reporting company must report the following info for beneficial owners:

• Full legal name
• Date of birth
• Residential street address
• ID # from driver’s license or passport with copy of document

Updating Info

There are obligations to promptly (typically 30 days) update information.  This could arise in numerous situations.

Court Challenges to Corporate Transparency Act

The Corporate Transparency Act has been challenged in courts. In a case brought by the National Small Business Association, the Association challenged the constitutionality of requiring stakeholder’s personal information to the Treasury Department’s criminal enforcement arm. More specifically, it was questioned whether Congress has the power to regulate entities and stakeholders in this way when they obtain a corporate status from a State. The Alabama Northern District Court found that the Corporate Transparency Act is unconstitutional because it exceeds the Constitution’s limits on Congress’ power. However, this ruling only prohibits the enforcement against the National Small Business Association and its members. As of the date of this article, the Treasury has since appealed this summary judgment and is pending review.

Due to such, there is no court decision precluding those non-members from filing. Its best to proceed as if the Corporate Transparency Act is effective, or to be fully prepared to file before 2025.

Failure to File

A person who willfully violates beneficial ownership reporting requirements may be subject to civil penalties of up to $591 for each day that the violation continues, as well as criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.

At Caldwell & Kearns, P.C. we are happy to assist you with any questions and navigating this report. For assistance call 717-232-7661.