Corporate Transparency Act – Q & A Update
David H. Freedman attended a webinar on October 4, 2023 presented by the Internal Revenue Service and the Financial Crimes Enforcement Network (FinCEN) on the Corporate Transparency Act (CTA) and Beneficial Ownership Information Reporting Requirements for Companies. The final regulations implementing the CTA become effective January 1, 2024.
Here are some of the Q & A’s from the webinar that were discussed by Michael Dobson, Senior Advisor with FinCEN during or after his presentation.
Q: Is There a Filing Fee?
A: There is no filing fee assessed by FinCEN in connection with the CTA reporting requirements.
Q: Will the effective date of implementing the CTA be delayed beyond January 1, 2024?
A: FinCEN’s first priority is to implement the final regulations under the CTA effective January 1, 2024 and it has been devoting substantial resources to make that possible.
Q: Can a parent company make a single CTA filing on behalf of itself and its subsidiaries?
A: No, any company that meets the definition of a reporting company and that is not exempt is required to make a CTA filing.
Q: Why Was There a Recent Notice of Public Rulemaking (NPRM) by FinCEN Proposing to Extend the Time Period for a Reporting Company formed on or after January 1, 2024 but Before January 1, 2025 to Submit its CTA Filing from 30 to 90 Days?
A: Since this is such a new rule (and non-exempt reporting companies formed prior to January 1, 2024 have 1 year to comply), extended the time from 30 to 90 days will give non-exempt reporting companies formed on or after January 1, 2024 but before January 1, 2025 additional time to further understand the regulations, help with compliance under the CTA and resolve any questions that might arise in the process. NOTE: This is still a proposal under the NPRM and subject to a 30-day public comment period. In addition, non-exempt reporting companies formed on or after January 1, 2025 would revert back to the 30-day filing requirement.
Q: Do the Reporting Companies Themselves have to Make the CTA Filing?
A: No, the filings can also be done by law firms, accounting firms or other third-party service providers.
Q: What if There Are Inaccuracies or Things Have Changed Since my CTA Filing?
A: The Reporting Company has 30 days to submit a corrected or updated CTA filing to FinCEN.
Q: Does the CTA apply to Sole Proprietorships?
A: No, since these types of entities are not formed through a secretary of state or similar state office (and are done at a county level), they are not considered a Reporting Company and have no CTA obligations. NOTE: The same analysis and conclusion would apply to a co-partnership or general partnership.
Q: Are the CTA Filings Public?
A: No, none of the information or documentation submitted to FinCEN under the CTA is a matter of public record.
Q: Who Has Access to the CTA Filings?
A: Federal, state and local governmental agencies in connection with matters that relate to national, state and local security, intelligence and law enforcement; financial institutions under certain circumstances but only with the consent of the reporting company as well as regulators that supervise such financial institutions.
Q: Where are the CTA Filings Stored?
A: The federal government is using the highest and most rigorous security standards under the Federal Information Security Modernization Act (FISMA) for non-classified sensitive information and documents.
Q: Are Lawyers and Accountants Beneficial Owners?
A: Generally no if the work being performed for the client Reporting Company is the general arm’s length relationship performed as a third party, however, it would depend on the circumstances. NOTE: Lawyers and accountants may be considered company applicants depending on their involvement with forming the Reporting Company. FURTHER NOTE: Company applicant information is not required for any non-exempt Reporting company formed before January 1, 2024. In addition to the extent company applicant information is reported, there are no further filing requirements as they relate to a company applicant.
Q: Do the Reporting Companies Themselves have to Make the CTA Filing?
A: No, the filings can also be done by law firms, accounting firms or other third-party service providers.
Q: Are a Manager and a Person Owning More than 25% of a Company Both Beneficial Owners and Subject to the CTA Reporting Requirements?
A: As it relates to the Manager, further analysis would have to be done to determine whether they actually exercise substantial control over the company (and, therefore, are a beneficial owner) and would depend on their role and whether they are the only manager, among other things. As it relates to the owner, since the ownership interest is at least 25%, that person would be a beneficial owner.
Q: Is the CTA Filing a One-Time Filing?
A: There is no annual or recurring reporting requirement, however, all inaccuracies and changes since the CTA filing need to be corrected by submitting a correction or update to FinCEN within 30 days. NOTE: For example, this would apply to things like changes in beneficial owners, address changes, renewal of drivers licenses and passports.
Q: When Can the CTA Filings Begin?
A: No earlier than January 1, 2024.
Q: When Will the CTA Filings Forms Be Available?
A: Before January 1, 2024. NOTE: This question was posed in different ways and no further information was provided other than it would be before the effective date of the final regulations (which is January 1, 2024).
Q: When Will the Online CTA Filing System Be Available?
A: Not until January 1, 2024. Instructions for technical guidance will be available before January 1, 2024.
Q: What Address Should the Reporting Company Provide in its CTA Filing?
A: The physical street address of its primary place of business and not a P.O. Box.
Q: Do I Need a FinCEN Identifier?
A: Not necessarily, however, upon request FinCEN will issue to an individual or reporting company a unique identifying number that can be used instead of certain required information about beneficial owners or company applicants to make matters more efficient. FinCEN identifiers will not be available until January 1, 2024.
Maddin Hauser is regularly monitoring the CTA and its regulations and has established a CTA resource blog page on its website and will be adding to and updating its CTA blog page as needed. We encourage you to monitor the firm’s CTA blog page for such information and updates.
Contact your Maddin Hauser attorney, David H. Freedman at dfreedman@maddinhauser.com (248-351-7011), or Jordan M. Small at jsmall@maddinhauser.com (248-351-7001) regarding any questions you may have regarding the CTA.