Corporate Transparency Act Update

Take-Away: One of the filing deadlines for the Corporate Transparency Act just got extended.

Background: The Corporate Transparency Act goes ‘live’ on January 1, 2024.The purpose of this Act is to prevent the illicit use of ‘shell companies’ to conceal illegal activities such as money laundering, tax evasion, or other criminal enterprises. As a generalization, the Act creates a new national beneficial ownership reporting regime for U.S. companies to FinCEN. The reported information is only accessible by law enforcement and governmental agencies. The required reports contain certain identifying information of the beneficial owners of a company/entity that is formed by filing with the state, and company applicants, i.e. attorneys who file the paperwork to create the company.

Trusts: While an estate planning Trust is technically not covered by the Act, if a Trust owns an interest in a reporting company, e.g., a closely-held business, then information about the Trust and its beneficiaries may need to be disclosed to  FinCen. Many small companies are subject to the Corporate Transparency Act, and thus interests in those smaller companies may be held in irrevocable trusts.

Change in Filing one Deadline: On September 27, 2023 FinCEN published a Notice of Rule Making. It amended its Final Rules (published on September 29, 2022) to provide 90 days for reporting companies created or registered in 2024 to file their initial reports, not 30 days as was included in the Final Rules.

Summary of Filing Deadlines: In light of this most recent change in Rules, the new reporting deadlines for reporting companies under the Corporate Transparency Act will be the following:

•  Formed/Registered prior to January 1, 2024, not later than January 1, 2025.
•  Formed/Registered on or after January 1, 2024, within 90 calendar days after receiving actual or public notice that the creation or registration of the reporting company is effective.
• Formed/Registered after January 1, 2025, and thereafter, within 30 calendar days of receiving actual or public notice of the creation or registration of the reporting company.
• The 30-day deadline to fix inaccurate, corrected, or updated reports remains the same as in the Final Rules. 
• If an individual has reason to believe a report filed with FinCEN contains inaccurate information and voluntarily submits a report correcting the information within 90 days of the deadline for the original report, then the Act creates a safe harbor from any penalties.

Conclusion: There are still some folks who think that the effective date of the Corporate Transparency Act will be pushed back even further. So far these appear to be nothing more than rumors.