FinCEN Issues Final Rules for Required Corporate Reporting
|
The Financial Crimes Enforcement Network (FinCEN) has issued a final rule establishing a beneficial ownership information reporting requirement, pursuant to the Corporate Transparency Act (CTA).
In their continuing efforts to stem money laundering, in 2021 Congress passed the Corporate Transparency Act (CTA) as part of the National Defense Authorization Act of 2021. The CTA authorizes the Financial Crimes Enforcement Network (FinCEN) to establish rules for the reporting of beneficial ownership information for certain corporations, limited liability companies (LLC), and similar entities created in or registered to do business in the United States.
The CTA authorizes FinCEN to collect information and disclose it to authorized government authorities and financial institutions, subject to effective safeguards and controls. The goal of the CTA and its implementing regulations is to provide essential information to law enforcement, national security agencies, and others to help prevent criminals, terrorists, proliferators, and corrupt oligarchs from hiding illicit money or other property in the United States.
Recently FinCEN issued a final rule establishing the specific beneficial ownership information reporting requirements. Beginning January 1, 2024, most corporations, LLCs, and other entities will be subject to the FinCEN reporting requirements. Reporting companies created or registered before January 1, 2024, will have one year to file their initial reports. Reporting companies created or registered after January 1, 2024, will have thirty days after that date to file their initial reports. Once the initial report has been filed, both new and existing reporting companies will have to file updates within thirty days of a change in their beneficial ownership information.
Key questions to determine if you will need to report:
1. What companies are “reporting companies” covered under the rule?
The rule identifies two types of reporting companies: domestic and foreign. A domestic reporting company is a corporation, LLC, or any entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe. A foreign reporting company is a corporation, LLC, or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office. FinCEN expects that these definitions mean that reporting companies will include limited liability partnerships, limited liability limited partnerships, business trusts, and most limited partnerships because such entities are generally created by a filing with a secretary of state or similar office.
Under the rule, and in keeping with the CTA, twenty-three types of entities are exempt from the definition of “reporting company.” Other types of legal entities, including certain trusts, are excluded from the definitions to the extent that they are not created by the filing of a document with a secretary of state or similar office. FinCEN recognizes that in many states the creation of most trusts typically does not involve the filing of such a formation document.
2. Who does the rule define as a “beneficial owner” who must be reported?
Under the rule, a beneficial owner includes any individual who, directly or indirectly, either (1) exercises substantial control over a reporting company, or (2) owns or controls at least 25 percent of the ownership interests of a reporting company. The rule defines the terms “substantial control” and “ownership interest.” In keeping with the CTA, the rule exempts five types of individuals from the definition of “beneficial owner.”
3. If reporting is required, what must be reported in the Beneficial Ownership Information Report (BOI reports)?
When filing BOI reports with FinCEN, the rule requires a reporting company to provide four pieces of information about each of the beneficial owners: (1) Name: the full legal name of the individual; (2) Address: the current residential or business street address. Note: a P.O. box, address of the company formation agent or third party does not satisfy the requirement; (3) Date of birth; and (4) A unique identifying number and issuing jurisdiction from an acceptable identification document such as a nonexpired U.S. passport, nonexpired State-issued driver’s license, or nonexpired foreign passport.
|
|
Case of the Month
Fajardo v. Dailey
|
A man trips, falls, and gets a suit reversed: this case involves a negligence action suit reversed on appeal. In December 2018, the Plaintiff went for a walk in his Monrovia neighborhood. As he hurried to cross an intersection before the traffic light turned red, he caught his sneakered foot on a lift in the asphalt sidewalk in front of the Defendant’s home, causing him to fall and hit his hands and knees on the ground.
In August 2019, the Plaintiff filed an action against the Defendant, the City of Monrovia, and the County of Los Angeles, alleging that the Defendant negligently maintained the sidewalk in a dangerous condition, including allowing a sidewalk displacement gap of over an inch in height, which caused his fall.
The response from the Defendant was that the alleged dangerous conditions amounted to a trivial defect, and she moved for a summary judgment. She submitted the Plaintiff’s deposition testimony that after he fell, he had measured the height differential with his key and described it as “a little more than one inch”. The Defendant also submitted an architect’s declaration which stated that the sidewalk complied with applicable codes, statutes and regulations and that the defect was trivial, along with several photographs of a tape measure next to the asphalt sidewalk gap suggesting that the differential was between 10/16 and 13/16 of an inch.
The Plaintiff’s subsequent response was to dispute the height differential measure and to argue that the height of the displacement, combined with other factors, made the sidewalk defect nontrivial. He submitted a forensic analyst’s declaration who stated that they visited the site in February 2021 and that although the asphalt patch had been removed and replaced with concrete, they measured the height differential as approximately 1 3/16 of an inch. The analyst stated that the asphalt patch was a “tripping hazard” and “not a trivial defect”.
The trial court agreed with the Defendant that the Plaintiff’s evidence that the lift was 1 3/16 inches “did not create a triable issue of material fact, considering that courts have found height differentials as big as 1 1/2 inches high to be trivial”. The court also found that “the obvious and distinctive nature of the asphalt patch” was consistent with a determination that the sidewalk’s condition was a trivial defect. The trial court granted the Defendant’s motion of summary judgement, and the Plaintiff timely appealed from the ensuing judgement.
In October 2022, the Appellate Court reversed the trial court’s ruling, finding that a) the Defendant didn’t meet her burden on summary judgment to show the defect was trivial as a matter of law and b) the Plaintiff created triable issues of material fact that precluded the summary judgment. The appeals court pointed out that while the architect’s supporting declaration stated that the height differential was less than one inch, he did not state how or why he knew this, nor did he give any other basis for his conclusion. As a result, the appeals court decided that it had no evidentiary value and could not support the summary judgment.
The appeals court also stated that even if the Defendant had met her moving burden on the summary judgment, the Plaintiff submitted evidence creating triable issues of material fact on the height differential. Unlike the Defendant’s architect, the Plaintiff’s forensic analyst provided a factual basis for their height conclusion. She stated that she personally visited the site after the asphalt patch was removed and replaced with concrete; she was able to take height measurements and found “a height differential of approximately 1 3/16 inches. She attached photos of the site taken by her company the day that she visited to substantiate her claim and in doing so, created a material fact.
The appeals court concluded with, “Because reasonable minds could differ about whether the condition of the asphalt patch, combined with the one and one-half height differential, presented a substantial risk of injury, the trial court erred in granting [Defendant’s] motion for summary judgment”. The appeals court reversed the judgment and ordered the Plaintiff to recover his costs on appeal.
|
|
What You Need to Know About California's ADU Grant Program
|
Accessory Dwelling Units (ADUs) are known by many names: casitas, granny flats, cottages, mother-in-law units, and more. But no matter what they’re called, the ability to build them has been legalized in much of California with the purpose of providing affordable, useful and remedial options to add livable space to a residential property.
To encourage development of ADUs, California has established a grant program that provides up to $40,000 towards pre-development and non-reoccurring closing costs that are associated with an ADU’s construction. The pre-development costs include but are not limited to: site preparation; architectural designs; permits; soil tests; impact fees; property surveys; energy reports and utility hookups. Interest rate buy-downs are also considered an eligible cost.
Homeowners with low or moderate incomes (as specified in the CalHFA Income Limits guide) are eligible. A homeowner will need to apply for a construction loan with an approved lender; the pre-development costs are rolled into the construction loan with no or minimal upfront costs to the homeowner. The homeowner then completes the CalHFA ADU grant application forms.
If the lender approves a homeowner’s construction loan, the lender can then prequalify the homeowner for the CalHFA ADU grant. At that point, predevelopment work starts and is paid through the construction loan account. The lender will then send the ADU Grant application to CalHFA, including a list of costs and invoices of pre-development. If CalHFA approves the grant, funds will be wired to the loan account, which will lower the ADU construction loan principle that the homeowner has to repay. Finally, construction of the ADU will commence, financed by the construction loan.
|
|
LITIGATION ASSOCIATE ATTORNEY
Come join our team!
RELAW, APC is seeking a full-time attorney with a minimum of 4-5 years of litigation experience to support our boutique real estate law firm located in Westlake Village.
Having experience in the real estate industry, specifically supporting escrow, is a plus.
Remote working conditions may be considered, but the candidate must be able to work at the company’s Westlake Village office on a regular basis.
|
|
Speaking Engagements & Events
|
|
Tuesday, December 6, 2022 from 12:00pm - 1:00pm:
CEA Lunch and Learn Webinar
Saturday, January 21, 2023
Escrow in the Court Class & Foreclosures, Short Sales and More Class.
Location: Ayres Hotel, Costa Mesa, CA
Saturday, January 28, 2023
Escrow Leadership Management Event.
Location: Ayres Hotel, Costa Mesa, CA
|
|
We're moving! Effective Dec. 12, 2022,
our new address will be:
2535 Townsgate Road, Suite 207
Westlake Village, CA 91361
Same telephone #: (805) 265-1031
|
Feel free to call or email for a free consultation.
We appreciate your referrals.
|
|
Jennifer Felten, Esq.
Principal & Editor
|
|
|
|
|
|
|