Filing Deadlines

The CTA requires each Reporting Company to disclose to the US Treasury Department's Financial Crimes Enforcement Network (FinCEN) specific information regarding (a) the Reporting Company itself, (b) its Beneficial Owners, and (c) with respect to a Reporting Company formed or registered to do business on or after January 1, 2024, its Company Applicants. To comply, each Reporting Company must file initial reports in a timely manner as set forth below, which initial filing deadlines are fast approaching or have already passed.

Filing Deadline for Reporting Companies Formed or Registered Prior to January 1, 2024

October 1, 2024, begins the three-month countdown for Reporting Companies formed or registered to do business prior to 2024 to submit their initial Beneficial Ownership Information Reports (BOIRs) to FinCEN. As a reminder, Reporting Companies formed or registered to do business under the law of a US State or Indian tribe prior to January 1, 2024, are required to submit initial BOIRs to FinCEN no later than January 1, 2025.

Filing Deadline for Reporting Companies Formed or Registered During 2024

Late last year, FinCEN finalized its revised reporting deadlines for Reporting Companies formed or registered to do business during 2024. Specifically, Reporting Companies formed or registered to do business under the law of a US State or Indian tribe on or after January 1, 2024, and before January 1, 2025, are required to submit initial BOIRs to FinCEN within 90 days of formation or registration.

Filing Deadline for Reporting Companies Formed or Registered in 2025 and Beyond

Reporting Companies formed or registered to do business under the law of a US State or Indian tribe on or after January 1, 2025, are required to submit initial BOIRs to FinCEN within 30 days of formation or registration.

Recent Developments

Since the passage of the CTA, FinCEN has engaged in CTA outreach through, among other things, the issuance and periodic update of FAQs in an attempt to clarify certain ambiguities raised by the CTA and its final rules. The following provides a brief summary of certain recent CTA developments and pertinent FinCEN FAQs.

CTA Litigation

On March 1, 2024, a federal district court ruled that the CTA was unconstitutional for specific plaintiffs. Such ruling was promptly appealed. FinCEN has clarified that while it will not enforce "the Corporate Transparency Act against the plaintiffs in that action: Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and members of the National Small Business Association (as of March 1, 2024)" until such litigation is resolved, it will continue to enforce the CTA against all other individuals and Reporting Companies. Therefore, notwithstanding any alluring headlines to the contrary, until all CTA litigation is finally adjudicated, the CTA remains in effect for essentially all individuals and Reporting Companies, which Reporting Companies should continue to timely file their BOIRs. Failure to comply may result in material civil or criminal penalties.

Reporting Companies That Cease to Exist

FinCEN released FAQ C.13 and FAQ C.14, confirming the reporting obligations of Reporting Companies that cease to exist or are in the process of dissolving prior to the filing of an initial BOIR. Specifically, a Reporting Company that irrevocably dissolved prior to January 1, 2024, is not required to submit a BOIR to FinCEN. However, a Reporting Company formed or registered to do business under the law of a US State or Indian tribe that "continued to exist as a legal entity for any period of time on or after January 1, 2024 (i.e., did not entirely complete the process of formally and irrevocably dissolving before January 1, 2024)" must nevertheless comply with the CTA's reporting requirements and file an initial BOIR. By way of example, it seems that a Reporting Company that ceases to exist within 90 days from its formation through a merger (as is common in M&A transactions (i.e., a so-called transitory merger subsidiary)) must nevertheless file an initial BOIR (unless it is otherwise exempt from the CTA's reporting requirements).

Disregarded Entities

For the avoidance of doubt, FAQ F.13 confirms that single member limited liability companies and other disregarded entities that are not otherwise exempt entities must file a BOIR. If a disregarded entity does not have its own Federal Employer Identification Number (FEIN), it may instead file its BOIR using the social security number or FEIN of its sole owner.

CTA and Advisors

FinCEN clarified in FAQ D.6 that accountants and lawyers are typically not Beneficial Owners of Reporting Companies. However, if an advisor provides services to a Reporting Company outside of the ordinary course of business, such advisor may be a Beneficial Owner. For example, if an advisor serves as, or has the authority of, a senior officer, director or manager of a Reporting Company, or serves as a Trustee of a Trust, such advisor may be deemed a Beneficial Owner. Advisors also may be Company Applicants if they are involved in the formation or registration process.

Additionally, nonlawyer advisors should exercise caution in advising clients on the CTA. By way of example, in July 2024, the New Jersey Supreme Court Committee on the Unauthorized Practice of Law circulated a letter determining that "complex" CTA filings are considered the practice of law requiring the attention of a licensed attorney. However, the Committee noted that licensed CPAs could assist clients in "straightforward" CTA reporting "provided the CPA notifies the client that it may be advisable to consult with a lawyer."

Treatment of a Reporting Company's "Partnership Representative" or "Tax Matters Partner"

FAQ D.10 states that a Reporting Company's "partnership representative" or "tax matters partner" is not automatically deemed to be a Beneficial Owner of the Reporting Company. However, like much of CTA analysis, this is fact-specific. If the authority of a "partnership representative" or "tax matters partner" under the applicable governing documents of a Reporting Company confers substantial control, or if such "partnership representative" or "tax matters partner" otherwise meets the requirements of the ownership test, then such "partnership representative" or "tax matters partner" may be a Beneficial Owner of the Reporting Company.

Exemptions

Large Operating Company Exemption. An entity that (a) directly employs more than 20 employees on a full-time basis in the United States, (b) filed (or is part of an affiliated group that filed) a US federal income tax or information demonstrating more than $5,000,000 in gross receipts or sales (excluding gross receipts or sales from sources outside the US) in the aggregate (on a consolidated basis, if applicable) in the previous fiscal year, and (c) has an operating presence at a physical office within the United States is exempt from the CTA's reporting requirements. FinCEN confirmed that "[t]he large operating company exemption requires that the entity itself employ more than 20 full-time employees in the United States and does not permit consolidation of this employee count across multiple entities."

Subsidiary Exemption. Any entity whose ownership interests are controlled or wholly owned, directly or indirectly, by one or more exempt entities (other than money services businesses, pooled investment vehicles, or entities assisting tax-exempt entities) is exempt from the CTA's reporting requirements. FinCEN has partially clarified in FAQ L.6 that "a subsidiary's ownership interests must be fully, 100 percent owned or controlled by an exempt entity" in order to meet the subsidiary exemption. Specifically, "[a] subsidiary whose ownership interests are controlled or wholly owned, directly or indirectly, by certain exempt entities is exempt from the BOI reporting requirements. In this context, control of ownership interests means that the exempt entity entirely controls all of the ownership interests in the reporting company, in the same way that an exempt entity must wholly own all of a subsidiary's ownership interests for the exemption to apply." Notwithstanding the foregoing FAQ, it remains unclear exactly what "entirely controls" means for purposes of this exemption.

BOIRs and Exempt Entities. FAQ L.5 states that if an entity has been exempt from its formation or registration to do business under the law of a US State or Indian tribe, it does not need to report to FinCEN. If a Reporting Company has filed a BOIR with FinCEN and later becomes exempt, it should file an updated BOIR and check the applicable box noting it is an exempt entity.