06 February 2024

The Corporate Transparency Act is Now Live: Are You Prepared?

As we announced at the end of 2023, the Corporate Transparency Act (“CTA”) went into effect January 1, 2024.  The seminal purpose of the CTA is to give the U.S. Financial Crimes Enforcement Network (“FinCen”), an arm of the U.S. Treasury Department, an additional tool to prevent money laundering, financial crimes, and related illegal activity in the U.S.’s financial system that are conducted through the veil of one or more entities.

The CTA will mainly impact smaller, non-regulated, or lightly regulated entities that do not fall within a statutory exemption, which are defined as a “Reporting Company” under the Act. FinCen estimates that CTA compliance will impact over 32 million Reporting Companies.

With the CTA now live, all new entities created on or after January 1, 2024 are required to file a report with FinCen within 90 days of formation, unless an entity qualifies under an exemption.  All existing entities formed prior to January 1, 2024 that do not qualify for an exemption will have until December 31, 2024 to file a Report with FinCen. Updates to certain information in these reports are due within 30 days of the applicable change occurring (e.g. updates to beneficial owners).

CTA enforcement will primarily be implemented through data collection in report format and electronically submitted to an online FinCen database known as the Beneficial Ownership Secure System (“BOSS”).  Each Reporting Company is responsible for filing a Report through the BOSS to provide information on itself and on the individuals (i.e., the human beings) who directly or indirectly control or own interests in the entity. These individuals are called the “Beneficial Owners.”  Those Reporting Companies that do not comply with these reporting obligations to FinCen may be subject to civil and/or criminal penalties.

There are 23 exemptions from an entity being classified as a Reporting Company. The exemptions are mainly focused on companies that are:

  • Publicly traded;
  • Highly regulated by some government body (SEC, CFTC, OCC, FINRA, insurance, utilities),
  • Tax-exempt (a 501(c)(3), 501(c)(4) organization), or
  • are large U.S. based operating companies with sufficient employees and U.S. sourced

Determining whether an entity is a Reporting Company or alternatively qualifies for an exemption can be an involved and highly technical analysis.  As mentioned in a prior alert, many business and entities will benefit from legal support on CTA analysis, reporting, and exceptions to disclosure.  In response to this demand, Miller Johnson has formed an active cross-functional task force to track the law’s implementation and develop secure, reliable workflows for initial and ongoing CTA compliance.  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
  • Coordinating with third party platform providers (such as national registered agent services) to leverage entity management platforms for CTA reporting
  • Interfacing with beneficial owners, advisors, third parties, trustees, custodians, and other constituents to collect and organize required information

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.