What Is the Corporate Transparency Act?
The Corporate Transparency Act (CTA) is a federal law aimed at protecting national security and helping prevent money laundering through shell and front companies. When entities are created through the State, their beneficial owners’ information (BOI) is not collected. The CTA will require the reporting of this information to FinCEN starting Jan. 1, 2024.
There are currently bills in Congress to delay the effective date of the CTA. Rea & Associates is closely monitoring this evolving situation and will provide our clients with additional information as it becomes available.
Who Must File A BOI Report?
- Domestic Reporting Company: Corporation, LLC, or other entity created with an applicable Secretary of State (SOS) filing.
- Foreign Reporting Company: Corporation, LLC, or other entity created under foreign law and registered in the U.S. with an applicable SOS filing.
What Information Is Reported On The BOI Report?
- Company:
- Full legal name
- Trade or DBA name, if applicable
- Current Street Address of the principal place of business
- State/jurisdiction of formation
- Taxpayer Identification Number
- Beneficial Owner(s):
- Full legal name
- Date of birth
- Current residential street address
- A unique ID number and issuing jurisdiction from one of the following:
- Passport
- State ID
- Driver’s license
- Foreign passport (only if an individual does not have the other items listed above)
- Image of document from which unique identifying number was obtained
A beneficial owner either directly or indirectly:
- Exercises substantial control over the reporting company, or
- Owns or controls at least 25% of ownership interests
All organizations will have at least one beneficial owner as there will always be someone who exercises substantial control.
- Company Applicant:
- (only for reporting companies created after Jan. 1, 2024)
Are There Exemptions?
There are 23 exemptions to the CTA filing requirement. The main exemptions that affect Rea clients are the tax-exempt entity and large operating company.
A large operating company is defined as a company with:
- More than $5 million in U.S. sourced gross receipts or sales, and
- More than 20 full-time employees in the U.S., and
- An operating presence at a physical office in the U.S.
When Is The BOI Report Due?
If the domestic reporting company was created before Jan. 1, 2024, the BOI report is due Jan. 1, 2025. If the domestic reporting company was created after Jan. 1, 2024, the BOI report is due 30 days after creation.
Updated or corrected reports need to be filed within 30 days of change or once an error is discovered. A beneficial owner or company applicant can apply for a FinCEN Identifier instead of reporting their information for every entity that they are associated with.
Penalties include civil penalties, fines or jail time for willfully providing false BOI report or failing to report.
By Kaitlyn Robison, CPA, CFE (Independence office)