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A number of clients have contacted us regarding the Corporate
Transparency Act asking if their trusts are affected by this law. For almost every trust we have assisted clients with the answer is no.
The Corporate Transparency Act (CTA) was enacted in 2021 over President Trump’s veto. The purpose is “intended to help prevent and combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity, while minimizing the burden on entities doing business in the United States.” The Financial Crimes Enforcement network (FinCEN) bureau of the Department of the Treasury is tasked with enforcing the law. All western European countries have had similar laws for many years and the United States has been pressured to enact its own version.
The American Bar Association has said, “Congress directs the United States Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to establish and maintain a national registry of beneficial owners of entities that are deemed ‘reporting companies.”
What is the Corporate Transparency Act?
The CTA is a law that requires business entities defined as reporting companies to disclose certain information about the company and its owners to the (FinCEN). Under the CTA, a reporting company may be a corporation, limited liability company (LLC), or other similar entity. The entity must be created by filing a document with the secretary of state or a similar office under the laws of a state or Indian tribe or formed under the laws of a foreign country and registered to do business in the United States. 1
Trusts are not entities created by filing a document with the secretary of state. Except in rare instances trusts are private agreements and while a trust may own a business it is not considered a business. The exceptions to this are not applicable to our practice.
A reporting company is required to submit certain information not previously required about the business entity and any individuals identified by the law as a beneficial owner to the federal government. We are reaching out to help you better understand the CTA and your potential obligations.
The following information about a reporting company must be included in the report:
● company’s legal name, and any trade name or “doing
business as” name
● street address of the principal place of business
● jurisdiction in which the business was formed
● tax identification number 2
Additionally, the reporting company must provide the following
information about its beneficial owners (BOI”), which are defined as persons who hold significant equity (25 percent or more ownership interest) in the reporting company or who exercise substantial control over the reporting company:
● full legal name
● date of birth
● current address
● unique identification number from an “acceptable
identification document” 3
Reporting companies created on or after January 1, 2024, must provide the same information about the company’s applicant (i.e., the person who files the creation documents for the reporting entity).
Does the CTA impact you?
Many business regulations apply only to large businesses, but the CTA specifically targets smaller business entities. If you own a small business, you may be subject to this act unless the business falls under one of the stated exemptions, which are primarily applicable to industries that are already heavily regulated. Your business may be exempt from reporting if it employs more than 20 full-time employees, filed a tax return with more than $5 million in gross receipts or sales, and has a physical office located within the United States. 4
The requirements are complex. The FinCEN booklet to guide small business owners is 57 pages.
If you have an entity as part of your estate plan, for example, to hold out-of- state real estate or valuable tangible personal property, receive valuation discounts, or protect assets, you may be required to comply with the CTA.
What do you have to do to comply with the CTA?
To comply with the act, you should gather the required BOI for all reporting companies that you are a beneficial owner of, as well as the information for any additional beneficial owners. Entities created before January 1, 2024, must submit the required reports by January 1, 2025. A reporting company created on or after January 1, 2024 and before January 1, 2025, must file its initial report within 90 days of the entity’s creation. Entities created on or after January 1, 2025, will have 30 days to submit the reports with FinCEN.
FinCEN has a BOI FAQ.
Depending on your estate plan and the type of entity that you own this may involve some research and paperwork. If you have any questions or need information to file your reports, please give us a call. We are assisting existing clients on a case-by-case basis.
1 31 U.S.C. § 5336(a)(11).
2 31 C.F.R. § 1010.380(b)(1)(i).
3 31 U.S.C. § 5336(b)(2)(A).
4 31 U.S.C § 5336 (a)(11)(B)(xxi).
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