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 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.