The Corporate Transparency Act that was passed as a part of the National Defense Authorization Act (NDAA) 2021 will be implemented over 2024.  Kristine Tidgren, Director of the Center for Agricultural Law and Taxation at Iowa State University, was on a recent National Agricultural Law Center webinar.

The webinar went through key aspects of the law including Beneficial Ownership Information (BOI) Reporting and the important details of who must file, what type of companies have to file, and how they file this information with the Department of the Treasury (DOT) Financial Crimes Enforcement Network (FinCEN).

The presentation largely focused on the BOI reporting requirements.  As reported by Tidgren, the history surrounding the BOI reporting stems from many in Congress trying for years to pass legislation to address the problems of shell corporations contributing to financial crimes.  It was vetoed by President Trump in 2020 but passed via Congressional override and was enacted on January 1, 2021.

The law builds on state business registration but on a federal level.  It will require more than 32 million businesses to begin filing new reports to disclose their beneficial owners to FinCEN.  This sub-agency of the DOT will maintain a national registry of beneficial owners of entities that aren’t subject to current disclosure regulations in the same way large corporations are currently subject to.  

The webinar explained further that companies created prior to January 1, 2024, have until January 1, 2025 to file their initial reports.  While companies created in 2024 have 90 days after creation to file their initial reports.  With all the law attempts to accomplish, there have already been challenges to the constitutionality of the law in the courts by certain entities representing businesses.

Tidgren outlined who is subject to this reporting law by describing the types of entities that are typically filed with secretaries of state offices.  This encompasses domestic and foreign reporting companies, such as Limited Partnerships, Sole Proprietorship, S Corporation, C Corporation, Limited Liability Corporations, or really any business created by a filing with a secretary of state office or Indian tribe.  Some exemptions include, non-profit organizations, public utilities, banks, government authorities, venture capital funds, insurance companies, among others.  

Further, beneficial owners that will be reported by these companies are individuals who exercise “substantial control” over the company or “own or control 25% or more of the reporting company.”  This can be described as C-suite employees, officers and other persons that aid in making substantial decisions for the reporting company.  Tidgren further examined direct or indirect control scenarios as well.  

The CTA also outlines that a reporting company must disclose the legal name and any trade name or DBA of the company.  The complete address of the principle place of business, the state in which the entity was formed, and its Taxpayer Identification Number (TIN).  Each beneficial owner will need to disclose full legal name, birth date, drivers license, and complete address.  Upon completing this, FinCEN will provide a FinCEN identifying number for the beneficial owner to use to provide company reports and updates.  Tidgren closed the presentation by going through the reporting page by page on the FinCEN website so viewers can see what to expect when they may begin the reporting process.  In closing, the webinar examined the multiple aspects and nuances of the law, but recommended that potential beneficial owners contact their attorneys before delving into the complex process.

National Agricultural Law Center Webinar Recording and Slides