Federal regulations were issued pursuant to the Corporate Transparency Act (“CTA”) and effective as of January 1, 2024.

The CTA requires both domestic and foreign-owned corporate entities, including corporations, limited liability companies, limited partnerships and other entities, (referred to below as “Reporting Companies”) to: 

• Report certain beneficial ownership information (“BOI”) to the US Department of the Treasury's Financial Crimes Enforcement Network (“FinCEN”).
• Disclose information about who created the entity or registered it to do business in the US (the “Company Applicant”).
• Report any change to previously reported information within a specified time period.

The CTA defines a “beneficial owner” as an individual or entity which directly or indirectly exercises “substantial control” over the Reporting Company, or directly or indirectly holds a 25% or greater ownership interest in the Reporting Company.  “Substantial control” refers to those having significant influence over the management, operations, or decisions of a company, which includes all directors, as well as executive officers such as CEO or president, CFO, COO, and general counsel. 

The CTA’s reporting requirements are intended to be broadly applicable, but will principally affect smaller companies, rather than larger or otherwise highly regulated entities.  However, the CTA does provide for 23 types of entities that are excluded from the definition of a “Reporting Company.”  These exempt entities include:

• Financial Institutions: Entities that are registered and regulated by federal authorities including banks, credit unions, depository institution holder companies, and money transmitting businesses already registered with FinCEN.
• Governmental Authorities: Entities that exercise governmental authority on behalf of the federal or a state government, or a political subdivision of such government.
• Larger Operating Companies: Entities that employ more than 20 full-time employees, have a physical office in the US, and have filed a federal income tax for the previous year demonstrating more than $5,000,000 in gross receipts or sales.
• Tax-exempt Entities: Entities that are tax exempt 501(c) organizations.
• Certain Subsidiaries: Entities that are part of a larger affiliated group of corporations may be exempt under certain situations, but not always, so careful analysis of any subsidiary companies will be required. 

 The reporting deadlines for the CTA are:

• Reporting Companies formed prior to January 1, 2024, have until December 31, 2024, to file an initial report.
• Reporting Companies formed on or after January 1, 2024, have 90 days after formation to file an initial report.
• Reporting Companies formed on or after January 1, 2025, will have 30 days after formation to file an initial report.
• Once initial filings have been made, any changes to an initial report must be reported within 30 days of the date on which the change occurred.

 The CMPR Team is currently working closely with third-party service providers to provide efficient and cost-effective compliance solutions for reporting under the CTA. If you have any questions regarding the CTA or require assistance, please do not hesitate to reach out to your usual CMPR contact. Otherwise, please contact Simon R. Inman or Paul Castillo; telephone: 707-526-4200.

In addition, you can find more information about the CTA and its compliance requirements directly from FinCEN at https://www.fincen.gov/boi.