GFB News Magazine
Are you compliant with the Corporate Transparency Act?
by Jay Stone
News Reporter
Posted on September 4, 2024 12:29 PM
NOTE: This article does not constitute legal advice. For guidance on complying with the Corporate Transparency Act, consult with an attorney.
The Corporate Transparency Act (CTA) of 2021 requires businesses to file a Beneficial Ownership Interest Report (BOIR) detailing who owns the business and who holds major decision-making authority over it.
The U.S. Department of the Treasury Financial Crimes Enforcement Network (FinCEN) is implementing the law that went into effect Jan. 1, 2024. Businesses in existence then must file by Dec. 31.
Businesses formed during 2024 have 90 calendar days after their formation to file a BOIR. Companies formed after Jan. 1, 2025, must file a BOIR within 30 days of being formed.
“They want to know who owns all of these small businesses across the country,” said National Ag Law Center Senior Staff Attorney Rusty Rumley. “The stated purpose is to look for tax evasion and money laundering.”
The potential penalties for failing to file the report are $500 for each day not in compliance, with a maximum of $10,000, and up to two years in prison.
The law requires any incorporated business – limited liability companies (LLCs), limited liability partnerships (LLPs), limited partnerships (LPs) and other businesses incorporated through a Secretary of State office in which a business is incorporated - to file a BOIR with FinCEN.
The BOIR includes information about the business and personal identifying details of all “beneficial owners” - individuals who own or control at least 25% of the reporting company, or anyone who exercises substantial control over the reporting company, like a president, CEO, CFO or general counsel.
Businesses already under extensive regulatory requirements that qualify as a “large operating company” are exempt from having to file a BOIR, but many farms or ag businesses may not qualify.
FinCEN defines a “large operating company” as one that meets all of the following criteria: has more than 20 full time employees in the U.S.; physically operates in the U.S.; filed a federal income tax return or information return in the U. S. for the previous year; reported $5 million in gross receipts or sales on IRS Form 1120, consolidated IRS Form 1120, IRS Form 1120-S, IRS Form 1065, or other applicable IRS form; and the entity’s amount of gross receipts or sales remains greater than $5 million if its gross receipts or sales from sources outside the U.S., as determined under federal income tax principle, are excluded.
An ag business would qualify for an exemption if it is a subsidiary of an exempt large operating company.
The BOIR requires the business name, complete address and a tax i.d. number. It also requires beneficial owners’ legal names, birth dates, residential addresses and an i.d. number from a current driver’s license, passport or other approved document.
Rumley said if a company or a beneficial owner changes its name or address or other required information, or the beneficial ownership changes, the new information must be reported.
The CTA was ruled unconstitutional by the U.S. District Court for the Northern District of Alabama in March. According to the NALC, the ruling only applies to the plaintiffs in the case – the National Small Business Association (NSBA) and the businesses that were NSBA members as of March 1 and co-plaintiff Isaac Winkles. The federal government has appealed the ruling.
For the NALC’s review of the law, visit https://gfb.ag/natlaglawcentercta.
For the Iowa State University review of the law, visit https://gfb.ag/isusmallentities.
For FinCEN’s guide to the BOIR or to file a BOIR, visit https://www.fincen.gov/boi.