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Preparing for the Corporate Transparency Act / Disclosure of Beneficial Ownership Information to FINCEN

New federal disclosure requirements for your businesses and entities will become effective January 1, 2024 – the reporting requirements are burdensome, can be triggered multiple times in a single calendar year and are subject to both civil and criminal liability. Accordingly, you should prepare to comply with the new law now.

Specifically, in 2021, Congress passed the Corporate Transparency Act, which can impact (subject to certain exceptions) essentially all businesses and investment vehicles (including, but not limited to, partnerships, limited liability companies and corporations). The CTA itself aims to combat money laundering, terrorism financing and other illegal activities by requiring entities to disclose information about the individuals who beneficially own and control them to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).

In that regard, the CTA authorizes FinCEN to collect beneficial ownership information (“BOI”, as discussed below) and disclose it to various federal and state agencies (including the Internal Revenue Service). Accordingly, if you own or control an entity, then you may be subject to these requirements.

Reporting Requirements

Beginning on January 1, 2024, most U.S. entities will be required to file a report with FinCEN identifying the beneficial owners of such entity (inclusive of driver’s license and/or passport), in addition to (among other things) the reporting entity’s address, jurisdiction and taxpayer identification number (TIN). Reports will be filed electronically through FinCEN’s filing system.

Generally, reporting entities formed prior to January 1, 2024 will have one year (i.e., January 1, 2025) to file their initial CTA reports. However, any reporting entity formed after January 1, 2024 will generally have 90 days after formation to file such initial reports. Further still, reporting entities must generally report changes to the above information within 90-days from such change.

Potential Penalties

An entity (and/or its owners) may be subject to a civil fine of up to $500 for each day the CTA report remains unfiled. Criminal penalties can also be imposed (including a $10,000 fine, imprisonment up to two years, or both).

Next Steps

While the CTA Forms have not yet been published, you should begin to gather information about your entities now, so that any CTA Forms can be timely submitted. Please reach out to us if you have questions about your CTA compliance.

About JMBM Trusts & Estates Group

JMBM’s Trusts & Estates Group focuses on estate planning, wealth transfer planning, trust administration and the resolution of trust disputes. Our Firm has one of the most active trusts and estates practices in California and our clients include individuals and families, and their business interests.