Notice: Corporate Transparency Act Reporting to FinCEN

On January 1, 2024, business entities such as corporations or LLCs formed or registered to do business under the laws of a United States jurisdiction will also be required to report to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) information about individuals who are their “beneficial owners” (including “controlling persons”) and “company applicants” pursuant to the Corporate Transparency Act (“CTA”). Required disclosures may include the individual’s residence address and a copy of a passport or driver’s license; an LLC without its own tax identification number may need to disclose the Social Security number of a sole individual member or, if the sole member is a trust that does not have a separate tax ID, the Social Security number of the grantor of the trust. The purpose of the CTA is to assist FinCEN in identifying entities that may be involved in money laundering, terrorism, tax evasion, organized crime, or other illegal activities. The CTA has both civil and criminal penalties.

Reporting requirements began January 1, 2024, and are part of the formation process for newly formed business entities. For existing entities, compliance requirements will need to be determined and any required beneficial ownership reports filed by January 1, 2025. The CTA describes what information must be reported by the business entity, who are considered beneficial owners, and who are company applicants. The CTA provides various exemptions to the reporting requirements, making compliance with this complex law dependent on the circumstances of each business entity and its beneficial owners. Individuals and business entities should consult with counsel about the CTA and potential reporting requirements.

Read the detailed notice here. 

Update: On March 1, 2024, the U.S. District Court for the Northern District of Alabama ruled that “[t]he Corporate Transparency Act is unconstitutional because it cannot be justified as an exercise of Congress’ enumerated powers.” But the ruling only prohibits enforcement of the Corporate Transparency Act against the plaintiffs in the case, i.e., the National Small Business Administration and its specific members named in the action. On March 4, FinCEN announced it also will not seek enforcement of the CTA against reporting companies that were members of the NSBA on or before March 1, 2024.   Similar cases are pending in other parts of the country, and parties will likely attempt to use this ruling in other challenges to the CTA. 

The ultimate effect of this ruling is unknown as the U.S. government will likely appeal and/or seek a stay of its enforcement. Reporting companies not parties to the case should continue to comply with the CTA unless there is a further invalidation of the law that extends to additional reporting companies. Reporting companies that were, or believe they may have been, members of the NSBA on or before March 1, 2024 may wish to seek legal counsel about the impact of FinCEN’s communications regarding its enforcement decision.  As a reminder, a reporting company newly formed in 2024 has 90 days after formation to report its beneficial ownership information, and a reporting company formed prior to 2024 has to report its beneficial ownership information before January 1, 2025 (in each case, unless an exemption applies).  

Update: On December 3, 2024, the U.S. District Court for the Eastern District of Texas entered a Memorandum Opinion and Order (the “December 3 Order”) granting a preliminary injunction enjoining the U.S. government from enforcing the Corporate Transparency Act (the “CTA”). Read more.