Corporate Transparency Act (CTA): An Overview of the Reporting Requirements

Banker Exchange, LLC would like to alert its clients about a new federal law which will impact most entities/companies.

As of January 1, 2024, the federal Corporate Transparency Act (CTA) has been implemented to enhance transparency and hinder illicit activities facilitated by obscure ownership structures. The CTA mandates the reporting of Beneficial Ownership Information (BOI) concerning the ultimate individual owners of entities, with reporting conducted through the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). The following are the highlights of the CTA. You should read the CTA in its entirety in order to properly comply.

Who:

Entities falling in the category of “reporting companies” under the CTA are obligated to comply with the filing requirements of the CTA. This includes domestic corporations, limited liability companies, and any other entity created by the filing of a document with a secretary of state or similar office in the U.S., along with entities formed under foreign laws but registered to operate in the U.S. Exemptions exist for various entities, such as government bodies, certain securities issuers, financial institutions, accounting firms, tax-exempt entities, and specific large operating companies, among others. Please review the requirements set forth in the CTA for specific rules and exemptions.

What:

In general, BOI requires disclosure of details about individuals who either directly or indirectly own or control at least 25% of a reporting company’s ownership interests or exercise substantial control over the reporting company. The Beneficial Ownership Information Report (BOIR) to be filed must contain information about the reporting company and the names, dates of birth, residential addresses and identification images of the beneficial owners, among other requirements.   Timely updates and corrections are required for any changes to the ownership structure or inaccuracies in filings. 

How:

Reporting is facilitated through the completion of a BOIR form submitted via an online portal accessible at https://www.fincen.gov/boi. FinCEN will provide a confirmation of receipt/filing once the report is successfully filed with FinCEN.

When:

In general, the key deadlines for reporting include:

Entities existing before January 1, 2024 must file a BOIR by January 1, 2025.
Entities created or registered after January 1, 2024 and before January 1, 2025 must file within 90 days of creation/formation/incorporation.
Companies created or registered after January 1, 2025 must file within 30 days.
Updated BOIRs must be filed within 30 days of any changes, inaccuracies or exemptions to existing filings.

Penalties:

Failure to comply with reporting requirements carries significant penalties, including civil (monetary) and/or criminal consequences. Providing false information or refusing to provide information may also result in accountability.

Impact to a 1031 Exchange:

While the CTA is a requirement for almost every entity, Banker Exchange, LLC would like to specifically alert its clients of this new federal law because of the impact it has on exchangors who are engaging in a reverse 1031 exchange, an improvement exchange, a leasehold improvement exchange or other parking arrangement requiring an exchange accommodation titleholder (EAT). Ownership of the EAT may be assigned to the exchangor at the conclusion of the exchange, which will necessitate a filing of a BOIR by the exchangor within the required timeframes set forth in the CTA. Failure of an exchangor to timely file the BOIR will result in significant penalties and/or imprisonment.

Questions?

We understand that navigating the new CTA regulations can be complex and may raise questions, especially in relation to your 1031 exchanges. Don’t hesitate to reach out if you have any queries or require assistance in understanding how these changes may impact your exchanges. For specific filing questions and requirements applicable to you, please carefully read the CTA and contact your accountant or legal counsel, as Banker Exchange does not provide legal and/or tax advice.