The Corporate Treasury Act (CTA) was enacted into law as part of the National Defense Act for Fiscal Year 2021. The CTA requires the disclosure of the beneficial ownership information (BOI) of certain entities from people who own or control a company. The intent of the BOI reporting requirement is to help U.S. law enforcement combat money laundering, the financing of terrorism and other illicit activity.

The CTA is not part of the tax code. Instead, it is part of the Bank Secrecy Act, a set of federal laws that require record-keeping and report filing on certain types of financial transactions. Under the CTA, BOI reports will not be filed with the IRS, but with the Financial Crimes Enforcement Network (FinCEN), another agency of the Department of Treasury.

We’re here to help assess if you have a BOI reporting requirement and how to meet this reporting obligation.

What entities are required to comply with the CTA’s BOI reporting requirement?

• Domestic companies:

1) Those required to report include corporations, LLCs or any similar entity created by filing a document with a secretary of state or any similar office.

2) Those not required to report include those not created by filing a document with a secretary of state or any similar office.

• Foreign companies required to report under the CTA include corporations, LLCs, or any similar entity that is formed under the law of a foreign country and registered to do business in any state by filing a document with a secretary of state or any similar office.

Are there any exemptions from the filing requirements?

Yes, there are 23 categories of exemptions. Included in the exemptions list are publicly traded companies, banks and credit unions, securities brokers/dealers, public accounting firms, tax-exempt entities and certain inactive entities, among others.

In addition, certain “large operating entities" are exempt from filing. To qualify from this exemption, the company must:

a) Employ more than 20 people in the United States,

b) Have reported gross revenue (or sales) of over $5M on the prior year’s tax return, and

c) Be physically present in the United States.

Who is a beneficial owner?

Two groups of individuals are considered beneficial owners of a reporting company. Specifically, this refers to any individual owner who, directly or indirectly, either:

1) Exercises substantial control over a reporting company, or

2) Owns or controls at least 25 percent of the ownership interests of a reporting company.

The detailed CTA regulations define the terms substantial control and ownership interest further.

When must companies file?

There are different filing timeframes depending on when an entity is registered/formed or if there is change to the beneficial owner’s information.

• New entities created or registered in 2024 must submit a report 90 days after the date of creation or registration.

• Existing entities created or registered before 2024 must submit a report by January 1, 2025.

• Reporting companies that have changes to previously reported information (or discover inaccuracies in previously filed reports) must submit an updated report within 30 days of the change.

What information is required to be reported?

Companies must report the following information:

• Full name of the reporting company, including any trade name or DBA name.

• Business address, state of formation and IRS taxpayer identification number.

• Full legal name, date of birth, street address and unique ID number (from U.S. passport, state driver’s license or other government-issued ID card) for each beneficial owner.

• For newly created entities (created or registered in 2024), the company applicant is also required to provide the same information that is required of beneficial owners.

We are here to help you understand your reporting requirement.

Penalties for noncompliance with the BOI reporting requirement are steep and can result in criminal and civil penalties of $500 per day that the report is late, up to $10,000 imprisonment for up to two years. Please contact your Harvard and Associates, PA client manager today at (850) 224-9008 to discuss these new reporting rules.