SC Lawyer

More information on the Corporate Transparency Act

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This blog has discussed the new Corporate Transparency Act twice recently. If you missed the discussion of the Small Entity Compliance Guide FinCEN issued in September, here is the link.

I wanted to share an additional piece of information. On September 30, FinCEN issued a Notice of Proposed Rulemaking to extend the deadline for filing beneficial ownership information reports. You can read the notice here.

This notice proposes to change the reporting deadline for new entities formed beginning in 2024 from 30 to 90 days. The press release indicates this extension is intended to reporting companies created or registered in 2024 additional time to understand their regulatory obligations under the new reporting rule. I think this change will be helpful, if implemented.

Please refer to the excellent September 2023 article in SC Lawyer entitled, “The Basic Ins and Outs of the Corporate Transparency Act” by Matthew B. Edwards and D. Parker Baker III.

This article provides an analysis of the basics of the Act, which is intended to help prevent money laundering, terrorist financing, corruption, tax fraud and other illicit activities. Many entities will be required to report information concerning beneficial owners to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), identifying their beneficial owners and providing certain information about them.

The act may apply to virtually every commercial real estate transaction because of the use of multi-tier entity structures to achieve business objectives. Lawyers will need to review clients’ organizational structure charts to determine entity by entity whether an exemption is applicable. If not, organizational documents, stockholder agreements, operating agreements will have to be reviewed to determine beneficial ownership.

Reporting information will include the name, address, state of jurisdiction and taxpayer identification number of every beneficial owner. Other information may be required, such as passports and driver’s licenses. Penalties for failure to comply will include civil penalties of no more than $500 per day, fines of no more than $10,000 and imprisonment for no more than two years. A safe harbor is included for voluntarily and promptly correcting an inaccurate report within 90 days. FinCEN will issue rules prior the effective date.

Don’t panic. We have time. The effective date is January 1, 2024. For companies formed prior to the effective date, the initial report is due January 1, 2025. For companies formed on or after the effective date, the first report is due 30 days following formation. This new rule, if implemented, will change that time-frame to 90 days.  

I think everyone’s initial advice as to new entities will be to refrain from forming those entities until the effects of the Act are analyzed. Existing entities will need to be analyzed pursuant to FinCEN’s rules.

Everyone will get through this together, and it’s likely that experts will emerge to help. This blog will keep you posted on new developments.

Heads up real estate lawyers!

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The new Corporate Transparency Act will apply to you and your clients!

This blog recently discussed the new Corporate Transparency Act. I’m repeating that blog in order to provide you with extra piece of information that should be helpful as you work to get ready for this new obligation of many clients. FinCen has recently published a compliance guide that you can read here.

Please refer to the excellent September 2023 article in SC Lawyer entitled, “The Basic Ins and Outs of the Corporate Transparency Act” by Matthew B. Edwards and D. Parker Baker III.

This article provides an analysis of the basics of the Act, which is intended to help prevent money laundering, terrorist financing, corruption, tax fraud and other illicit activities. Many entities will be required to report information concerning beneficial owners to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), identifying their beneficial owners and providing certain information about them.

The act may apply to virtually every commercial real estate transaction because of the use of multi-tier entity structures to achieve business objectives. Lawyers will need to review clients’ organizational structure charts to determine entity by entity whether an exemption is applicable. If not, organizational documents, stockholder agreements, operating agreements will have to be reviewed to determine beneficial ownership.

Reporting information will include the name, address, state of jurisdiction and taxpayer identification number of every beneficial owner. Other information may be required, such as passports and driver’s licenses. Penalties for failure to comply will include civil penalties of no more than $500 per day, fines of no more than $10,000 and imprisonment for no more than two years. A safe harbor is included for voluntarily and promptly correcting an inaccurate report within 90 days. FinCEN will issue rules prior the effective date.

Don’t panic. We have time. The effective date is January 1, 2024. For companies formed prior to the effective date, the initial report is due January 1, 2025. For companies formed on or after the effective date, the first report is due thirty days following formation.

I think everyone’s initial advice as to new entities will be to refrain from forming those entities until the effects of the Act are analyzed. Existing entities will need to be analyzed pursuant to FinCEN’s rules during 2024.

Everyone will get through this together, and it’s likely that experts will emerge to help.

Heads up real estate lawyers!

Standard

The new Corporate Transparency Act will apply to you and your clients!

Please refer to the excellent September 2023 article in SC Lawyer entitled, “The Basic Ins and Outs of the Corporate Transparency Act” by Matthew B. Edwards and D. Parker Baker III.

This article provides an analysis of the basics of the Act, which is intended to help prevent money laundering, terrorist financing, corruption, tax fraud and other illicit activities. Many entities will be required to report information concerning beneficial owners to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), identifying their beneficial owners and providing certain information about them.

The act may apply to virtually every commercial real estate transaction because of the use of multi-tier entity structures to achieve business objectives. Lawyers will need to review clients’ organizational structure charts to determine entity by entity whether an exemption is applicable. If not, organizational documents, stockholder agreements, operating agreements will have to be reviewed to determine beneficial ownership.

Reporting information will include the name, address, state of jurisdiction and taxpayer identification number of every beneficial owner. Other information may be required, such as passports and driver’s licenses. Penalties for failure to comply will include civil penalties of no more than $500 per day, fines of no more than $10,000 and imprisonment for no more than two years. A safe harbor is included for voluntarily and promptly correcting an inaccurate report within 90 days. FinCEN will issue rules prior the effective date.

Don’t panic. We have time. The effective date is January 1, 2024. For companies formed prior to the effective date, the initial report is due January 1, 2025. For companies formed on or after the effective date, the first report is due thirty days following formation.

I think everyone’s initial advice as to new entities will be to refrain from forming those entities until the effects of the Act are analyzed. Existing entities will need to be analyzed pursuant to FinCEN’s rules during 2024.

Everyone will get through this together, and it’s likely that experts will emerge to help.