New Year to Bring Dramatic New Beneficial Ownership Reporting Obligations for Millions of Companies
A major change in federal law will impact tens of millions of existing and new entities starting on January 1, 2024. This new law is called the Corporate Transparency Act (or “CTA”) and will implement a broad regime of disclosure and transparency designed to reveal entity owners and non-owners who have a certain degree of decision-making authority over the entity.
The CTA is set to launch on January 1, 2024 and will generally require all existing entities and new entities formed on or after this effective date that meet the definition of a “reporting company” to report their “beneficial owners” to the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). While reporting companies that exist prior to January 1, 2024 will have a full year to comply with the CTA, entities formed after this date will only have 90 days during 2024 (and only 30 days starting in 2025) to report their beneficial ownership information to FinCEN once they have been formed.
While the CTA was passed into law in early-January 2021 on a largely bipartisan basis, over a Presidential veto, the Treasury Department’s implementation and rulemaking process have mostly flown under the radar, resulting in many unanswered questions. A recent national survey revealed that a majority of businesses that will be impacted by the CTA were not yet aware of the new law’s existence. While many professional service firms have already begun getting the word out through articles and alerts, there are many unanswered questions behind the CTA’s rules and implementation, with FinCEN attempting to produce updated guidance on an ongoing basis.
The most recent guidance for business published by FinCEN, including FAQs on compliance, can be found at the following links:
Despite the significant remaining uncertainties and concerns in the business community about the security of information reported, FinCEN has not shared plans to extend the above mentioned deadlines, and it will begin accepting beneficial ownership reports on January 1, 2024 through an online portal known as the Beneficial Ownership Secure System (“BOSS”). Those who do not comply with the new reporting obligations may be subject to civil and/or criminal penalties. Although this beneficial ownership information will not be available to the public at large, government officials – federal, state, local, tribal and even international – may be granted access to this new store of information under the BOSS submission for law enforcement purposes.
Because many business and entities will benefit from legal support on CTA analysis, reporting, and exceptions to disclosure, Miller Johnson has formed a cross-functional task force to track the law’s implementation and develop secure, reliable workflows for initial and ongoing CTA compliance. For example, the Miller Johnson CTA task force can support the following:
- Determining if your business or entity is a “reporting company” under the CTA
- Assessing if any of the 23 exemptions to the CTA reporting obligations apply to your business or entity
- Analyzing multi-tiered structures, entities, and trusts to identify reporting companies and beneficial owners
- Advising on applicable deadlines for reporting companies
- Identifying “beneficial owners” who must be included on a reporting company’s submissions to FinCEN
- Creating secure and reliable compliance records identifying the company and beneficial owner information that must be reported to FinCEN
- Interfacing with beneficial owners, advisors, third parties, trustees, custodians, and other constituents to collect and organize required information
The CTA marks a radical change in the federal government’s role in relation to beneficial ownership information of privately-held companies. While the intent of the CTA is to thwart illegal activities (e.g., money laundering, terrorist/criminal financing, etc.), be aware that the CTA’s casted net is wide and the mesh is extremely fine. As a result, a significant byproduct of this transparency effort will be to dramatically increase the reporting and compliance costs of millions of legitimate, law-abiding businesses and entities.
Please contact your Miller Johnson attorney or any one of the Miller Johnson CTA task force members listed to the left to learn more about how we may be able to support you in preparing for CTA compliance.
The Miller Johnson CTA task force will also be hosting a series of webinars over the coming months to promote awareness among businesses and other entities and to address more specific frequently asked questions. To receive updates about future alerts and webinars, please sign-up here: https://lp.constantcontactpages.com/su/D3osakj/SIgnUp
You can view our webinar on this subject, presented by Erik Daly and Raj Malviya, on our YouTube channel: https://youtu.be/RODUTg8OCPo