{"id":2291,"date":"2023-10-29T22:28:42","date_gmt":"2023-10-29T22:28:42","guid":{"rendered":"https:\/\/www.smecpa.com\/?p=2291"},"modified":"2023-12-04T16:41:25","modified_gmt":"2023-12-04T16:41:25","slug":"beneficial-ownership-reporting-and-the-cta","status":"publish","type":"post","link":"https:\/\/www.smecpa.com\/beneficial-ownership-reporting-and-the-cta\/","title":{"rendered":"Beneficial Ownership Reporting and the CTA"},"content":{"rendered":"\n

Starting January 1, 2024, a significant number of businesses will be required to comply with the Corporate Transparency Act (\u201cCTA). The CTA was enacted into law as part of the National Defense Act for Fiscal Year 2021. The CTA requires the disclosure of the beneficial ownership information (otherwise known as \u201cBOI\u201d) of certain entities from people who own or control a company.<\/p>\n\n\n\n

It is anticipated that 32.6 million businesses will be required to comply with this reporting requirement. The intent of the BOI reporting requirement is to help US law enforcement combat money laundering, the financing of terrorism and other illicit activity.<\/p>\n\n\n\n

The CTA is not a part of the tax code. Instead, it is a part of the Bank Secrecy Act, a set of federal laws that require record-keeping and report filing on certain types of financial transactions. Under the CTA, BOI reports will not be filed with the IRS, but with the Financial Crimes Enforcement Network (FinCEN), another agency of the Department of Treasury.<\/p>\n\n\n\n

Below is some preliminary information for you to consider as you approach the implementation period for this new reporting requirement. This information is meant to be general-only and should not be applied to your specific facts and circumstances without consultation with competent legal counsel and\/or other retained professional adviser.<\/p>\n\n\n\n

What entities are required to comply with the CTA\u2019s BOI reporting requirement?<\/strong><\/h2>\n\n\n\n

<\/p>\n\n\n\n

Entities organized both in the U.S. and outside the U.S. may be subject to the CTA\u2019s reporting requirements. Domestic companies required to report include corporations, limited liability companies (LLCs) or any similar entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.<\/p>\n\n\n\n

Domestic entities that are not created by the filing of a document with a secretary of state or similar office are not required to report under the CTA.<\/p>\n\n\n\n

Foreign companies required to report under the CTA include corporations, LLCs or any similar entity that is formed under the law of a foreign country and registered to do business in any state or tribal jurisdiction by filing a document with a secretary of state or any similar office.<\/p>\n\n\n\n

Are there any exemptions from the filing requirements?<\/strong><\/h2>\n\n\n\n

There are 23 categories of exemptions. Included in the exemptions list are publicly traded companies, banks and credit unions, securities brokers\/dealers, public accounting firms, tax-exempt entities and certain inactive entities, among others. Please note these are not blanket exemptions and many of these entities are already heavily regulated by the government and thus already disclose their BOI to a government authority.<\/p>\n\n\n\n

In addition, certain \u201clarge operating entities\u201d are exempt from filing. To qualify for this exemption, the company must:<\/p>\n\n\n\n

  1. Employ more than 20 people in the U.S.;<\/li>
  2. Have reported gross revenue (or sales) of over $5M on the prior year\u2019s tax return; and<\/strong><\/li>
  3. Be physically present in the U.S.<\/li><\/ol>\n\n\n\n

    Who is a beneficial owner?<\/strong><\/h2>\n\n\n\n

    Any individual who, directly or indirectly, either:<\/p>\n\n\n\n