The Corporate Transparency Act is here!

This section is provided for informational purposes only and does not constitute legal advice to any specific person or entity. Complex assessments often have to be made under the Corporate Transparency Act (“CTA”), and the rules under the CTA change frequently. Accordingly, the contents of this section may become inaccurate over time in light of subsequent developments, and in any case, they may not reflect the specifics of individual situations. For all these reasons, a qualified attorney should be consulted in connection with compliance obligations under the CTA.

Disregarded Entities

On July 24, the Financial Crimes Enforcement Network (“FinCEN”) updated its Frequently Asked Questions to clarify which taxpayer identification number (“TIN”) disregarded entities should use in Beneficial Ownership reporting. This update addresses compliance with the CTA for disregarded entities in various situations.

A Reporting Company disregarded for tax purposes must report Beneficial Ownership Information (“BOI”), including a TIN. The BOI for a disregarded entity must include one of the following TIN types:

· If the disregarded entity has its own Employer Identification Number (“EIN”), it may report its EIN as its TIN. A disregarded entity is not required to obtain an EIN to meet its BOI reporting requirements, as long as it provides another type of TIN, or if a foreign reporting company not issued a TIN, a taxpayer identification number issued by a foreign jurisdiction and the name of that jurisdiction.

· If the disregarded entity is a single-member Limited liability company or has only one owner who is an individual with a Social Security Number (“SSN”) or Individual Taxpayer Identification Number (“ITIN”), it may report the individual’s SSN or ITIN.

· If the disregarded entity is owned by a U.S. entity with an EIN, it may report that entity’s EIN as its TIN.

· If the disregarded entity is owned by another disregarded entity or a chain of disregarded entities, it may report the TIN of the first owner in the chain of disregarded entities that has a TIN as its TIN.

· If the disregarded entity is a single-member limited liability company or has only one individual owner, it may consider obtaining its own EIN rather than reporting the individual owner’s SSN or ITIN.

For more detailed information and to stay updated on any further developments, entities and interested parties are advised to consult the resources provided by FinCEN and legal professionals specializing in financial regulatory and compliance matters.

Angularis can assist with the BOI reporting and ongoing compliance. Please contact us at info@angularisglobalservices.com for more information. 

Sources: FinCEN BOI FAQs: https://www.fincen.gov/boi-faqs#F_13

Dissolved Entities

The Financial Crimes Enforcement Network (“FinCEN”) has issued new guidance on the Beneficial Ownership Information (“BOI”) reporting requirements under the CTA for entities that are dissolved after the CTA's effective date of January 1, 2024. According to the latest updates, reporting companies that were created before January 1, 2024, but dissolved on or after this date, are required to file a BOI report. This also applies to reporting companies created on or after January 1, 2024, but dissolved before their filing deadline, which is currently 90 days from creation.

Entities that ceased to exist as a legal entity before the reporting requirements went into effect are not required to report BOI to FinCEN. However, companies that continued to exist as a legal entity for any period on or after January 1, 2024, must report BOI to FinCEN, even if they ceased conducting business before this date.

FinCEN's updated Frequently Asked Questions (“FAQ”) clarify that the requirement to file a BOI report remains even if the company ceases to exist before its filing deadline. The FAQs also detail when a company is considered to 'cease to exist,' which generally means it has completed the process of formally and irrevocably dissolving under the laws of the jurisdiction where it was created or registered.

This guidance is significant for transactions involving the formation and dissolution of corporate entities as part of the transaction structure, as well as for recently formed corporate entities that have been dissolved. It is crucial for such entities and their legal advisors to be aware of these requirements to ensure compliance and avoid potential penalties.

For more detailed information and to stay updated on any further developments, entities and interested parties are advised to consult the resources provided by FinCEN and legal professionals specializing in financial regulatory and compliance matters.

Angularis can assist with the BOI reporting and ongoing compliance. Please contact us at info@angularisglobalservices.com for more information. 

Sources: FinCEN BOI FAQs: https://www.fincen.gov/boi-faqs#C_13, https://www.fincen.gov/boi-faqs#C_14 

FinCEN Issues Final Rule Regarding Access to Beneficial Ownership Information

Today, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) has issued a final rule that establishes the framework for access to and protection of Beneficial Ownership Information (“BOI”). The rule requires reporting companies to report to FinCEN within prescribed time periods information about themselves, as well as information about individuals who are beneficial owners of the reporting company. The BOI will provide essential information to the law enforcement, intelligence, and national security professionals working to protect U.S. economic and national security. Financial institutions will also have access under certain circumstances.

FinCEN is also issuing two interagency statements today to give banks and non-bank financial institutions guidance on the interplay between the final rule and FinCEN’s existing Customer Due Diligence Rule.

Sources:

- FinCEN Beneficial Ownership information: https://www.fincen.gov/boi

· News release: https://www.fincen.gov/news/news-releases/fincen-issues-final-rule-regarding-access-beneficial-ownership-information

· Fact Sheet: https://www.fincen.gov/news/news-releases/fact-sheet-beneficial-ownership-information-access-and-safeguards-final-rule

The Corporate Transparency Act is a law that was passed in 2021 to enhance transparency in entity structures and ownership to combat money laundering, tax fraud, and other illicit activities.

The CTA requires certain entities in the United States to report information about their Beneficial Owners, i.e., the individuals who ultimately own or control the entity, to the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury.

The CTA aims to prevent the misuse of anonymous shell companies for criminal purposes and to assist law enforcement in investigating and prosecuting financial crimes.

The CTA applies to Reporting Companies, which are defined as either domestic or foreign entities that are created or registered to do business in the United States.

Reporting Companies include corporations, limited liability companies, limited partnerships, limited liability partnerships, business trusts, and any other entity created by the filing of a document with a Secretary of State, Indian Tribe or a similar office.

There are 23 exemptions available to Reporting Companies, each with specific requirements. 

Reporting Companies need to report the following information to FinCEN:

• Full legal name
• Any "Doing Business As" names
• Complete current business address
• State, Indian Tribe, or foreign jurisdiction of formation
• Tax identification number, or a foreign equivalent if not issued by the IRS

Reporting Companies need to report the following information about their Beneficial Owners to FinCEN:

• Full legal name
• Date of birth
• Current residential address
• Unique identifying number from an acceptable identification document (such as a passport or driver’s license) or a FinCEN identifier

A Beneficial Owner is an individual who, directly or indirectly, either has at least 25% ownership interests of the Reporting Company or exercises substantial control over the Reporting Company.

Reporting Companies formed after January 1, 2024 also need to report the same information about the Company Applicants, i.e., the individuals who file an application to form or register the Reporting Company.

Reporting Companies need to submit their reports to FinCEN electronically through a secure online portal that will be available by January 1, 2024.

• Reporting Companies that are already in existence before January 1, 2024, must submit their reports before January 1, 2025.
• Reporting Companies that are formed or registered after January 1, 2024, must submit their reports within 90 calendar days of the date of formation or registration.
• Reporting Companies that are formed or registered after January 1, 2025, must submit their reports within 30 calendar days of the date of formation or registration.

Reporting Companies must update their reports within 30 calendar days of any change in their Beneficial Ownership information.

FinCEN can disclose the information to:

• A Federal agency engaged in national security, intelligence, or law enforcement activity, for the use inf furtherance of such activities.
• A State, local, or tribal law enforcement agency as part of a criminal or civil investigation, with court approval.
• A foreign government, to assist an investigation if a Federal agency requests the information.
• A financial institution with the consent of the Reporting Company, to facilitate compliance of the institution with Customer Due Diligence.
• A Federal regulator to determine compliance of a financial institution with their Customer Due Diligence requirements.

Civil Penalty - USD 591 per day in civil monetary penalties

Criminal Penalty - USD 10,000 fine, imprisonment of no more than 2 years, or both

No penalties for filing an inaccurate report provided the report is corrected within 90 calendar days of when it was filed.

The CTA is expected to provide several benefits, such as:

• Enhancing national security and law enforcement efforts by making it harder for criminals and terrorists to hide their identities and assets behind shell companies
• Improving tax compliance and revenue collection by reducing tax evasion and fraud through offshore entities
• Increasing trust and confidence in the U.S. financial system and business environment by promoting transparency and accountability

The CTA also poses some challenges, such as:

• Imposing additional costs and burdens on small businesses that have to collect and report beneficial ownership information
• Protecting the privacy and security of the reported information from unauthorized access and misuse
• Harmonizing the CTA requirements with existing state and federal laws and regulations that may overlap or conflict with the CTA

The Corporate Transparency Act is landmark legislation that aims to improve transparency in entity structures and ownership to combat money laundering, tax fraud, and other illicit activities.

The CTA requires certain companies in the United States to report information about their Beneficial Owners and Company Applicants to FinCEN, a bureau of the U.S. Department of the Treasury.

The CTA has potential benefits and challenges for both the public and private sectors, and its implementation and enforcement will depend on the issuance of the CTA regulations by FinCEN and the cooperation of the relevant stakeholders.