The Corporate Transparency Act
What is CTA?
The information shared on this page is intended to inform readers on the new enactment and is not to be considered as tax advice or consultation. It is your responsibility to consult your professional advisor to understand how this statute applies to your individual situation. This page is for informational purposes only.
The Corporate Transparency Act (CTA), enacted in 2021, mandates the disclosure of beneficial ownership information for specific entities by individuals who own or control the company. This crucial requirement aims to bolster the efforts of U.S. law enforcement in combating money laundering, terrorism financing, and other illicit activities. It’s important to note that BOI reports are to be filed with FinCEN, an agency of the Department of Treasury, rather than the IRS.
Whose Required to file a BOI report?
Entities, both domestic and foreign, may be subject to the reporting requirements of the Corporate Transparency Act (CTA). Domestic companies that must comply with the CTA include corporations, limited liability companies (LLCs), and similar entities that are established by filing a document with a secretary of state or a similar office under the laws of a state or Indian tribe.
On the other hand, domestic entities that are not created through such filings are not obligated to report under the CTA. Foreign companies, on the other hand, are required to report if they are corporations, LLCs, or similar entities formed under the laws of a foreign country and registered to conduct business in any state or tribal jurisdiction by filing a document with a secretary of state or a similar office.
Whose exempt from complying with CTA?
The final regulations include a comprehensive list of 23 categories of exemptions. These exemptions encompass a wide range of entities, such as publicly traded companies, banks and credit unions, securities brokers/dealers, public accounting firms, tax-exempt entities, and certain inactive entities, among others. It is important to note that these exemptions are not universal and many of these entities are already subject to rigorous government regulations, which require them to disclose their beneficial ownership information to a government authority.
Furthermore, there are specific exemptions for “large operating entities.” To qualify for this exemption, a company must meet the following criteria:
– Employ more than 20 people in the United States.
– Have reported gross revenue (or sales) of over $5 million on the previous year’s tax return, and
– Maintain a physical presence within the United States.
When is the filing due date of the BOI report and do you file it?
There are different filing timeframes depending on when an entity is registered/formed or if there is a change to the beneficial owner’s information.
New entities (created/registered in 2024) — must file within 90 days
New entities (created/registered after 12/31/24) — must file within 30 days
Existing entities (created/registered before 1/1/24) — must file by 1/1/25
Reporting companies that have changes to previously reported information or discover inaccuracies in previously filed reports — must file within 30 days
In a manner similar to the Report of Foreign Bank and Financial Accounts (FBAR), FinCEN plans to introduce an electronic filing system through their website. However, this system will not be accessible until January 1, 2024. Furthermore, they are actively developing a third-party e-filing system that will enable businesses to fulfill their filing obligations with the assistance of external parties.
How can your CPA help you fulfill your BOI Requirements?
Given that the Corporate Transparency Act (CTA) is a recent development, there is currently limited guidance available to navigate its rules. Furthermore, there have been ongoing discussions regarding the “practice of law” and whether non-attorneys can offer beneficial ownership information (BOI) services. Until states provide definitive guidance on this matter, our firm must consider the potential risks associated with engaging in unauthorized practice of law.
We will continue to keep you updated on this matter as information becomes available to us. As a firm specializing in serving small businesses, we believe that assisting you in fulfilling your CTA requirements would align with our current objectives and we hope we are able to continue to do so where this matter is concerned.
Check out FinCen’s Small Business Entity Guide on BOI reporting here.
FinCEN's Intro to BOI
Check out this video that explains the Beneficial Ownership Information reporting requirements
Access to FinCEN Reporting
Learn more about CTA directly from FinCEN
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