New Reporting Requirements Under the Corporate Transparency Act (CTA)

November 5, 2024

Corporate Transparency Act (CTA)

As of January 1, 2024, the Corporate Transparency Act (CTA), part of the National Defense Authorization Act, has introduced new reporting requirements for certain entities, primarily small and medium-sized businesses. These entities must now report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN).

The CTA was enacted to prevent and combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activities, for those entities doing business in the United States.

Key Reporting Deadlines

Existing Entities: Companies created or registered in the U.S. before January 1, 2024, must file the Beneficial Ownership Information Report (BOI Report) with FinCEN by January 1, 2025.
New Entities: Companies created or registered in 2024 must file within 90 days. Those created or registered after December 31, 2024, must file within 30 days.
Updates: Reporting companies must file within 30 days if there are changes to previously reported information or if inaccuracies are discovered.

Who Needs to Report?

Your company may need to report if it falls under the following categories:

Entities organized in the U.S., including corporations, S-corporations, partnerships, limited liability companies (LLCs), and other types of entities created by filing with a Secretary of State or equivalent official.
Non-U.S. entities registered to do business in the U.S. through filing a document with a Secretary of State or equivalent official.

Exemptions

There are 23 categories of exemptions, including:

Publicly traded companies
Banks and credit unions
Securities brokers/dealers
Public accounting firms
Tax-exempt entities
Certain inactive entities

Additionally, “large operating entities” are exempt if they meet all three criteria:

Employ more than 20 people in the U.S.
Report gross revenue over $5 million on the prior year’s tax return, and
Are physically present in the U.S.

Definition of a Beneficial Owner

A beneficial owner is any individual who:

Exercises substantial control over a reporting company, or
Owns or controls at least 25% of the ownership interests of a reporting company.

Substantial control includes directing, determining, or exercising substantial influence over important decisions of the reporting company, including senior officers regardless of formal title or ownership interest.

Required Information

Companies must report:

Full name of the reporting company
Any trade name or DBA name
Business address
State or Tribal jurisdiction of formation
IRS taxpayer identification number (TIN)

For beneficial owners and company applicants (for newly created entities), the following information is required:

Name
Birthdate
Address
Unique identifying number and issuing jurisdiction from an acceptable identification document (e.g., driver’s license or passport)
Image of the identification document

Who can access beneficial ownership information?

Under the CTA, authorized entities—including federal, state, local, and tribal officials, as well as select foreign officials—can access beneficial ownership information for vital national security, intelligence, and law enforcement purposes.

Financial institutions may gain access to this information under certain conditions, provided they have the consent of the reporting companies. This framework aims to enhance transparency while safeguarding essential information for legitimate uses.

Penalties for Non-Compliance

Failure to comply with the CTA can result in significant penalties, including:

A daily penalty of $591, up to $10,000
Imprisonment of up to two years for willful failure to file timely reports

Next Steps

Andersen LLP can assist you with:

Submission of the BOI Report to FinCEN
Obtaining a FinCEN ID to facilitate future reporting requirements

Contact us for assistance with BOI Reporting due January 1, 2025.

Since the CTA is not part of the tax code, determining beneficial ownership and other requirements may require legal guidance. As we are not attorneys, our firm cannot provide legal determinations regarding exemptions or beneficial ownership. Please consult legal counsel for any questions or concerns about how these requirements affect your company.

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