In 2019, Congress passed the Corporate Transparency Act (CTA), a law intended to address corruption and money laundering. Since then, the Financial Crimes Enforcement Network (FinCEN) has been developing new regulations to execute CTA's requirements. In January, FinCEN published proposed rules that give an insight into new reporting requirements for an estimated 30 million small businesses. While these rules won't go into effect for several months, business owners should start familiarizing themselves with the coming requirements.

Reporting the “Beneficial Owner”

Under the proposed rules, FinCEN may require LLCs, corporations, and registered limited partnerships to file an annual report with FinCEN, identifying every “beneficial owner” of the business. A beneficial owner is anyone who owns or controls 25% of the company, with the exception of minor children, heirs with a passive right of inheritance, and those acting on behalf of the company, or those who are agents for someone else.

Reporting Requirements

The timing of regulations will likely depend on how long the company has been operating. Existing companies will have some time after the regulation is implemented to meet the filing deadline, while new companies will probably need to supply this information within two weeks of the company's formation. 

While the regulations haven't yet been finalized, businesses can expect to  provide FinCEN with the following types of information for each owner:

• Full legal name
• Date of birth
• A residential or business street address
• A unique government identifier (such as a passport or driver's license number)

It is important to note that civil and criminal penalties, including fines or prison time, may be imposed for willfully failing to report the beneficial owner information or reporting false or fraudulent information.

NEW REQUIREMENTS REQUIRE EXPERIENCED TAX COUNSEL

While these FinCEN requirements are still being worked out, more regulations are still to come over the next few months. To make sure you are fully prepared for the changes, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options.