FinCEN Corporate Transparency Act (CTA) Reporting:

• What is a beneficial owner?
• Am I required to report beneficial ownership information?
• What information am I required to report to FinCEN?
• When do I have to begin reporting beneficial owner information?

In 2022, the Financial Crimes Enforcement Network (a bureau of the United States Treasury Department) issued a final ruling on companies' reporting of beneficial ownership information to the federal government. On January 1, 2024, this new reporting requirement will come into effect for companies doing business in the United States.

Probably the first question that comes to your mind is, “What is a beneficial owner?” The final rule issued by the Financial Crimes Enforcement Network defines a beneficial owner as anyone who "directly or indirectly, either exercises substantial control over such reporting company or owns or controls at least 25 percent of the ownership interests of such reporting company."

Which brings us to the next critical question, "Am I required to report beneficial ownership information?" Well, if your company has fewer than 20 employees and less than $5 million in gross receipts or sales (based on the prior year’s tax returns), you must report your beneficial ownership information to the federal government. Also, if your company is a foreign-owned pooled investment vehicle, you are required to report this information regardless of the number of employees you have or the amount of your gross receipts or sales. There are, however, exceptions these rules. If your company falls into one of the following twenty-three categories, you are exempt from reporting:

1. Securities reporting issuer
2. Governmental authority
3. Bank
4. Credit union
5. Depository institution holding company
6. Money services business
7. Broker or dealer in securities
8. Securities exchange or clearing agency
9. Other Exchange Act registered entity
10. Investment company or investment adviser.
11. Venture capital fund adviser
12. Insurance company
13. State-licensed insurance producer
14. Commodity Exchange Act registered entity
15. Accounting firm
16. Public utility
17. Financial market utility
18. Pooled investment vehicle (unless it is a foreign legal entity)
19. Tax-exempt entity
20. Entity assisting a tax-exempt entity
21. Large operating company
22. Subsidiary of certain exempt entities
23. Inactive entity

A Closer Look at 23 Exemption Provisions in the FinCEN Corporate Transparency Act

Now that we know what a beneficial owner is and who is required to report this information, we need an answer to the question, "What information am I required to report to FinCEN?" The answer to this question breaks down into three areas: company information, beneficial owner information, and company applicant information. Reporting companies are required to provide the following information:

1. Company Name (including all trade or DBA names)
2. Company Address (no PO Box or address of company formation agent)
3. Jurisdiction of Formation and Registration
4. Company Identification Numbers (TIN or EIN; foreign company with no TIN must provide a foreign tax identification number)

The following information is required for each beneficial owner of the company:

1. Full legal name
2. Date of birth
3. Current residential or business street address

• A business address for company applicants who create or register companies in the course of their business.
• A residential address for all other individuals, including beneficial owners.

4. Unique identification number from an acceptable identification document -or- FinCEN identifier.
The list of acceptable identification documents are: a non-expired passport issued by the United States; a non-expired identification document issued by a State, local government, or Indian Tribe to the individual acting for the purpose of identification of that individual; a non-expired driver’s license issued by a State; or if the individual does not have the previous documents, they can provide a non-expired passport issued by a foreign government. You can also obtain a FinCEN identifier by submitting to FinCEN an application containing the following information: Full legal name; Date of birth; and Current residential or business street address.

5. An image of the identifying document

And finally, a company applicant is defined as the individual who directly files the document to create or register the reporting company and the individual who is primarily responsible for directing or controlling such filing if more than one individual is involved in the filing. All company applicants are required to provide the following:

1. Full legal name
2. Date of birth
3. A business street address
4. Unique identification number from an acceptable identification document -or- FinCEN identifier.
The list of acceptable identification documents are: a non-expired passport issued by the United States; a non-expired identification document issued by a State, local government, or Indian Tribe to the individual acting for the purpose of identification of that individual; a non-expired driver's license issued by a State; or if the individual does not have the previous documents, they can provide a non-expired passport issued by a foreign government. You can also obtain a FinCEN identifier by submitting to FinCEN an application containing the following information: Full legal name; Date of birth; and Current residential or business street address.

5. An image of the identifying document

The last item we will address in this article is, "When do I have to begin reporting beneficial owner information?" If your company is formed prior to January 1, 2024, you are required to begin reporting beneficial ownership information by January 1, 2025. However, if your business is formed on or after January 1, 2024, you are required to submit your beneficial ownership information 30 days from the date of your company's formation.

URS Agents will play a crucial role in assisting entities with fulfilling their reporting obligations under the Beneficial Ownership Information (BOI) Reporting requirements of the Corporate Transparency Act (CTA). URS will act as intermediaries between the entities and the Financial Crimes Enforcement Network (FinCEN). The following is an overview of the new requirements that could impact your business.

The Corporate Transparency Act "CTA" is a U.S. federal law enacted by the Financial Crimes Enforcement Network ("FinCEN") to combat money laundering, terrorist financing, and other illicit activities.

Under the CTA, certain entities are required to report information about their beneficial owners (Beneficial Ownership Information or "BOI") to FinCEN. The term "beneficial owner" refers to an individual who directly or indirectly owns or controls 25% or more of the ownership interests of a legal entity, or exercises substantial control over the entity.

The reporting obligation applies to various types of entities, including corporations, limited liability companies (LLCs), and other similar entities that are formed or registered to do business in the United States. Certain entities, such as publicly traded companies and certain financial institutions, are generally exempt from reporting.

The implementation and enforcement of the CTA and the BOI reporting requirements are overseen by FinCEN, which is an agency within the U.S. Department of the Treasury. Starting January 1, 2024 it will be important for covered entities to comply with these reporting obligations to avoid potential penalties and ensure transparency in corporate ownership.