Corporate Transparency Act ("CTA")
- Enacted by Congress in 2021
- Part of 2021 National Defense Authorization Act
- Intended to assist law enforcement
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- 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
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- 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
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- 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
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- Failing to advise clients of CTA reporting requirements
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- Send client alerts/newsletter
- Include disclaimer in engagement letters
- Be careful of "off-the-cuff" advice
- Unauthorized Practice of Law concerns
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- 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
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- A company that is required to report under the CTA
- Beneficial Owner
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- Individual who owns 25% of Reporting Company, or has "substantial control"
- "BOI" = Beneficial Ownership Information
- Company Applicant
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- Individual responsible for forming a Reporting Company
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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.