The Corporate Transparency Act (CTA) was enacted by the United States Congress, and signed into law by President Joseph Biden, in 2021 as part of the Anti-Money Laundering Act of 2020. The purpose of the CTA is to combat money laundering and terrorism funding. The CTA takes effect on January 1, 2024.
What does the CTA require?
The basic requirement set forth by the CTA is that certain privately-owned companies must provide an annual report with information about the company’s beneficial owner(s) and about the company itself to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
Who is a beneficial owner?
The CTA defines “beneficial owner” as any person who, directly or indirectly, either owns or controls 25% or more of the reporting company or exercises substantial control over the reporting company.
Which companies must report?
The CTA imposes reporting obligations on domestic and foreign companies that meet the CTA’s definition of “reporting company.” Generally, reporting companies include corporations, LLCs, LLPs, business trusts, and other similar entities registered to do business in any U.S. State, possession, or Tribal jurisdiction.
There are, however, 23 categories of exemptions. Exempt entities include large operating companies, public companies, investment companies and investment advisors, venture capital fund advisors, pooled investment vehicles, banks, securities broker-dealers, and tax-exempt entities. Additionally, entities whose ownership interests are controlled or wholly owned, directly or indirectly, by one or more exempt entities (other than by a pooled investment vehicle, a money-transmitting or money services businesses, an entity that operates exclusively to provide financial assistance to or hold governance rights over tax-exempt entities, or an inactive entity) are also exempt.
What information must be reported?
Reporting companies formed before January 1, 2024, must submit certain information about its beneficial owner(s) and about the company itself. The information that a reporting company must disclose about its beneficial owner(s) include the beneficial owner’s full legal name, date of birth, complete current address, and government-issued identification, such as a driver’s license or a U.S. or foreign passport. The reporting company must also disclose certain information about itself, including its full legal name, trade names or doing business as (d/b/a) names, current address of its principal place of business, jurisdiction of formation, and its IRS taxpayer identification number (TIN) and employer identification number (EIN).
In addition, reporting companies formed on or after January 1, 2024, must also report information about the company applicants. There can be up to two individuals who qualify as a company applicant: the individual who directly files the documents that creates, or first registers, the reporting company, and the individual that is primarily responsible for directing or controlling the filing of the relevant document. No reporting company will have more than two company applicants. If only one person was involved in filing the relevant document, then only that person should be reported as a company applicant. The information to be reported about the reporting company’s company applicant(s) is the same as that for the beneficial owner(s), outlined in the preceding paragraph.
When must the reports be filed?
The CTA takes effect on January 1, 2024 (“the Effective Date”). Reporting companies that were formed before the Effective Date have until January 1, 2025, (one year following the Effective Date), to file its first annual report with FinCEN. Reporting companies formed on or after the Effective Date must file their report within 30 days of formation.
FinCEN will begin accepting reports on January 1, 2024. FinCEN will not accept reports before then.
Who will have access to the reports?
FinCEN is to store the beneficial ownership reports in a secure, nonpublic database. FinCEN may disclose the reported information only upon a lawful and appropriate request from authorities including law enforcement, government agencies, and courts.
The attorneys on the Seward & Kissel Maritime Practice Team have extensive experience with a vast array of maritime regulatory issues. If there are any questions, please contact any attorney on the Seward & Kissel Maritime Practice Team.