THE CORPORATE TRANSPARENCY ACT AND A NEW REPORTING REQUIREMENT

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THE CORPORATE TRANSPARENCY ACT AND A NEW REPORTING REQUIREMENT

Starting January 1, 2024 existing and new entities will have a new reporting requirement called the “Beneficial Ownership Information” report which must be filed with the Financial Crimes Enforcement Network (or FinCEN, a division of the U.S. Treasury Department).  There is no fee or tax associated with the reporting; however, the penalties for willful noncompliance can be as high as $500 per day the violation continues and up to $10,000.

In summary, the Corporate Transparency Act of 2021 is intended to provide law enforcement information for purposes of detecting, preventing, and punishing money laundering and other misconduct through business entities established in the U.S. by requiring a disclosure of each entity’s respective “beneficial owners”.  In general, this may be a relatively simple reporting for many entities and their owners; however, more complex or tiered ownership structures are likely to dedicate more time and cost to comply. Although required by federal law, many have raised concerns associated with privacy, burdens of reporting, and other issues that may be comparable to other current informational filings with FinCEN such as the Foreign Bank Account Reporting (FBAR). 

The Treasury Department has yet to issue final guidance on the reporting as well as a draft of the form(s) that will be needed to remit the necessary information to FinCEN.  A draft of the form is anticipated to be released on or before January 1, 2024.

New entities formed in 2024 will have 90 days to file the BOI reports with FinCEN.  Whereas entities existing prior to January 1, 2024 will have until December 31, 2024 to file the first BOI report.  We believe that most entities and their managers will opt to prepare and file the BOI reports themselves but of course, we are available to assist and answer questions as they arise.