On December 1, 2021, we issued a Client Alert summarizing the Corporate Transparency Act (CTA). This is a federal law passed to combat “shell company” money laundering, tax evasion, and other financial crimes. The CTA provides for the issuance of regulations requiring disclosure of beneficial ownership information of certain entities to the Financial Crimes Enforcement Network (FinCEN). On September 30, 2022, the CTA Final Rules were published (Final Rules).
The final rule applies to all corporations, limited liability companies, and other entities incorporated or registered to do business in the United States (collectively, reporting companies), whether domestic or foreign, with certain exceptions. Applies. The types of exempt entities under the final rule are:
Most financial services, investment, accounting, and banking institutions are licensed by or report to agencies such as the SEC and FDIC.
tax exempt entity
Companies with a physical presence in the United States, more than 20 full-time employees, and annual gross revenues greater than $5 million
Inactive Entities (defined in Final Rule)
The final rule will take effect on January 1, 2024. A reporting company established or registered before January 1, 2024 has one year to file its first report, but he has until January 1, 2025 at the latest. Reporting Companies created or registered on or after January 1, 2024 must submit their first report within 30 days of creation or registration. Once the initial report has been filed, existing and new reporting companies must submit an update within 30 days of any change in beneficial owner information.
The final rule requires reporting companies to submit certain information about their “beneficial owners.” This is defined as an individual, directly or indirectly, defined as either (1) exercising effective control over the reporting entity or (2) owning or controlling at least 25. Percent ownership of the reporting company. The information provided includes legal full name, date of birth, current address, unique identification number, and jurisdiction of issuance from certain approved documents.
Reporting companies created or registered on or after January 1, 2024 must also submit the personal information of their company’s “Corporate Applicant.” For domestic entities, the company applicant is the individual directly filing the documents creating the domestic reporting company. For foreign entities, the corporate applicant is the individual who first personally files the papers registering the foreign reporting company in the United States. The information you provide will not be made public, but FinCEN does have the authority to disclose information to certain government agencies.
The final rule is the first of three rules planned to fully implement the CTA. FinCEN has (1) established rules about who can access beneficial owner information, for what purposes, and what safeguards are necessary to ensure that the information is protected; and (2) engage in additional rulemaking to revise FinCEN’s customer due diligence rules. In light of the CTA.
© Steptoe & Johnson PLLC. All rights reserved.National Law Review, Volume XII, No. 343