In 2021, Congress passed a law to increase transparency concerning individuals that control organizations and corporate entities (the Corporate Transparency Act or “CTA”). Beginning January 1st, 2024, under a new Financial Crimes Enforcement Network (“FinCEN”) rule, entities – including tax exempt entities – must disclose information related to the entity itself AND directors and officers. Historically, FinCEN worked to combat money laundering, tax fraud and the financing of terrorism.
The rule covers corporations, limited liability companies and all entities created under state law (e.g., those filing with the Virginia State Corporation Commission, DC Corporations Division or Maryland SDAT). The information required at the entity level is the legal name (and trade name), relevant addresses state of incorporation/organization and federal EIN. The Report must also include similar information for each individual “beneficial owner”.
The definition for a “beneficial owner” is very broad and can be viewed to include every officer and director of an entity, including tax-exempt entities. Specifically, an individual who, directly or indirectly
- exercises substantial control over the entity, or
- owns or controls not less than 25 percent of the ownership interests of the entity.
“Substantial control” under the regulation includes serving as a senior officer (e.g., president, chief financial officer, general counsel, chief executive officer, Vice President and the like) , or having substantial influence over and entity’s important decisions. Under the rule, existing entities have until January 1, 2025 to comply.
If you have questions regarding the Corporate Transparency Act, please contact us today.
