Shedding Light On The Corporate Transparency Act

Corporate Transparency Act ("CTA")

• Enacted by Congress in 2021
• Part of 2021 National Defense Authorization Act
• Intended to assist law enforcement
• • Combat money laundering, fraud, foreign interference, terrorism, and other illegal activities

CTA in a Nutshell

• Requires nearly all small businesses in the US to file reports with FinCEN beginning January 1, 2024
• Reports include information about the company and Beneficial Ownership Information ("BOI") about each of the company's "Beneficial Owners"
• Strict deadlines for initial and updated reports
• Criminal and civil penalties

Statutes and Regulations

• CTA is codified at 31 USC § 5336, et seq.
• Treasury has produced a set of final regulations at 31 CFR 1010.380, et seq.
• Several proposed rules currently pending
• • Regulations dealing with government access to information and related safeguards
  • Deadline extension (from 30 days to 90 days) for initial reports for companies formed after January 1, 2024

Other FinCEN Guidance

• Small Entity Compliance Guide
• Quick Reference Guides
• FAQs
• • Several dozen questions and answers
  • Issued at various times in 2023 and updated/added to periodically
  • Not formal rules/regulations
• https://www.fincen.gov/boi/small-business-resources

Small Businesses – Burdens and Considerations

• Criticism of FinCEN outreach/education
• Tens of millions of collective hours, and billions in costs, each year to comply
• Update governance documents to assist with/require cooperation by owners, officers, etc.
• Dissolve or form entities before January 1, 2024
• Third party service providers
• Penalties and prosecution

Concerns for CPAs

• AICPA has issued a Risk Alert regarding the CTA
• Potential areas of concern for CPAs
• • Failing to advise clients of CTA reporting requirements
  • • Send client alerts/newsletter
    • Include disclaimer in engagement letters
  • Be careful of "off-the-cuff" advice
  • Unauthorized Practice of Law concerns
  • • Technical/interpretive advice of CTA and its requirements could constitute practice of law
    • NCGS Sec. 84-1, et seq.
  • Check with your malpractice carrier

Definitions

• Reporting Company
• • A company that is required to report under the CTA
• Beneficial Owner
• • Individual who owns 25% of Reporting Company, or has "substantial control"
• "BOI" = Beneficial Ownership Information
• Company Applicant
• • Individual responsible for forming a Reporting Company

To read this presentation in full, please click here.

Originally published December 06, 2023

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.