UPDATE: Getting Ready for The Corporate Transparency Act

By: Robyn Drucker 

UPDATE: Getting Ready for The Corporate Transparency Act

The Corporate Transparency Act (CTA) takes effect on January 1, 2024.  As described in Cohen and Wolf’s guidance, Getting Ready for the Corporate Transparency Act, the CTA requires certain domestic and foreign entities, referred to as “Reporting Companies,” to report identifying information about their “Beneficial Owners” to the US Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”).  The filings, referred to as Beneficial Ownership Information (“BOI”) reports, may not be filed until January 1, 2024 and must comply with the CTA and FinCEN’s complex filing requirements. 

BOI Report Filing Deadlines (Updated)

According to FinCEN’s updated guidance, the following filing deadlines apply to all Reporting Companies:

• A Reporting Company created or registered to do business before January 1, 2024 must file an initial BOI Report on or before January 1, 2025.

• A Reporting Company created or registered on or after January 1, 2024 and before January 1, 2025 will have 90 calendar days after it is created to file an initial BOI report.

This timeline, which was modified by FinCEN in November 2023, commences when the Reporting Company receives actual notice that its creation or registration is effective, or after a Secretary of State or similar office first provides public notice of its creation or registration, whichever is earlier. 

• A Reporting Company created after January 1, 2025 will have 30 calendar days from actual or public notice that the Company’s creation or registration is effective to file an initial BOI report.

Note that certain additional extensions are under consideration but have not yet been formally adopted.

BOI reporting is an ongoing obligation – although there is no annual reporting requirement, an updated BOI report is required within 30 calendar days after (i) a change to certain previously reported information about the Reporting Company or the Beneficial Owners or (ii) the Reporting Company becomes aware or has reason to know of an inaccuracy in previously reported information.   Failure to update or correct information may result in penalties – however, a Reporting Company may avoid penalties if it corrects a mistake or omission within 90 days of the deadline for the report requiring correction.

FinCEN has issued a Small Entity Compliance Guide and BOI FAQs  which may be used as resource guides for determining reporting obligations. 

BOI Reporting Processes and Procedures

BOI reports will be filed electronically through a secure filing system that will be available via FinCEN's Website. No charge is expected to be required for the filing of BOI reports.   

Reporting Companies may, but are not required, to use third parties, including filing companies and professional service providers like lawyers or accountants, to support their reporting obligations.  Anyone authorized to act on behalf of the Reporting Company, including employees, owners, and third-party service providers, may file a BOI report for the Reporting Company.

BOI reports will be required to contain information about the Reporting Company itself (including legal and trade names, address, jurisdiction of formation and taxpayer identification number) and about Beneficial Owners (including name, date of birth, residential address and an identifying number and name of issuing state or jurisdiction from an acceptable identification document, including a non-expired passport or drivers’ license, a copy of which must be provided to FinCEN).

Notably, Reporting Companies created or registered on or after January 1, 2024 must, as part of their initial BOI report, disclose certain information about the Reporting Company’s “Company Applicant,” defined as the individual who directly files the document that creates or registers the company; and, if more than one person, the individual who is primarily responsible for directing or controlling the filing. The Company Applicant information required includes the individual’s name, date of birth, address and an identifying number and name of issuing state or jurisdiction from an acceptable identification document, including a non-expired passport or drivers’ license, a copy of which must be provided to FinCEN.

Reporting Companies and individuals who are Beneficial Owners or Company Applicants may be able to streamline their reporting obligations by obtaining a FinCEN Identifier, which is a unique identifying number issued by FinCEN upon receipt and satisfactory review of certain identifying information about the individual. The FinCEN identifier may be entered to identify the Reporting Company, Beneficial Owner or Company Applicant across multiple BOI reports without the need for entering personally identifying information in each report.

Access to BOI

The CTA establishes that BOI is confidential and may not be disclosed, except as specifically authorized under the CTA and certain other rules issued by FinCEN.  On December 21, 2023, FinCEN issued a Final Rule establishing a phased framework for access to and protection of BOI. 

Under the CTA and the Final Rule, FinCEN is authorized to disclose BOI to six categories of authorized recipients, each of whom will be subject to specific security and confidentiality requirements. According to FinCEN, authorized recipients include:  (1) U.S. Federal agencies engaged in national security, intelligence, or law enforcement activity; (2) U.S. State, local, and Tribal law enforcement agencies; (3) foreign law enforcement agencies, judges, prosecutors, central authorities, and competent authorities (foreign requesters); (4) financial institutions using BOI to facilitate compliance with customer due diligence (CDD) requirements under applicable law; (5) Federal functional regulators and other appropriate regulatory agencies acting in a supervisory capacity assessing financial institutions for compliance with CDD requirements under applicable law; and (6) Treasury officers and employees.

Compliance/Enforcement - Penalties

FinCEN expects that Reporting Companies will verify the information they receive from their Beneficial Owners and Company Applicants before submitting a BOI report to FinCEN.

As specified in the CTA, a person (an individual or an entity) who willfully violates the BOI reporting requirements (including, for example, willfully failing to file a BOI report, willfully filing or providing false BOI, or willfully failing to correct or update previously reported BOI) may be subject to civil penalties of up to $500 for each day that the violation continues, and criminal penalties of up to 2 years imprisonment and fines of up to $10,000.   

A person who knowingly discloses or uses BOI obtained from a report submitted to, or an authorized disclosure made by FinCEN, may be subject to civil penalties of $500 for each day that the violation continues and criminal penalties of up to 5 years imprisonment and fines of up to $250,000.  There are also enhanced penalties for certain serious violations.

Preparing For CTA

As January 1, 2024 quickly approaches, all business enterprises should begin the process of determining their legal obligations under the CTA, including:

• reviewing the CTA and available guidance from FinCEN (Reference Materials);

• taking inventory of existing entities and determining whether each entity qualifies as a Reporting Company;

• examining whether one of CTA’s exemptions is applicable to each entity; and

• if no exemption is applicable, identifying and compiling required information regarding each Reporting Company, its Beneficial Owners (and, if applicable, its Company Applicant(s)).

From initial BOI reports to updated FinCEN filings as changes in beneficial ownership and entity information inevitably occur, the CTA is expected to impact millions of entities doing business in the United States.  Cohen and Wolf’s Business & Corporate and Tax attorneys are ready to help your business navigate its obligations and reporting requirements under the CTA.

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