TAX LAW SPECIAL REPORT – July 2024: If You Own a Corporation, A Limited Liability Company or a Limited Partnership, Here is What You Need to Know About This New Reporting Requirement
July 31, 2024
The rules to implement the Corporate Transparency Act were recently updated. The Corporate Transparency Act is the federal legislation I have reported on previously that imposes federal reporting requirements on millions of small businesses. The legislation and implementing rules require all corporations, limited liability companies (LLCs), and limited partnerships formed in the United States to report the personal information of every individual who owns at least 25% of, or exercises “substantial control” over, each corporation, LLC or limited partnership.
The Financial Crimes Reporting Network (FinCEN), a bureau of the United States Department of the Treasury, began accepting reports under the Corporate Transparency Act on January 1 of this year. Under the Act, your personal identifying information must be reported to FinCEN for every existing or new corporation, LLC, and limited partnership, and must be updated every time there is a change to the reported information.
This new reporting regime finally started getting some attention in the general news media when the effective date started to get close. At that point the ever-helpful federal government decided to change the rules. And it has continued to provide “additional guidance” even after the reporting regime went into effect on January 1.
The biggest change made in the “additional guidance” is that corporations, LLCs, and limited partnerships formed on or after January 1, 2024, and before January 1, 2025, now have ninety days from the date of their formation to make their initial report. That reporting period was originally thirty days, but was extended to ninety days only for companies formed in 2024. The reporting period will be thirty days for companies formed on or after January 1, 2025. Companies formed before January 1, 2024, have until January 1, 2025, to file their initial report.
I won’t try to describe all the details now, but here are the basics of what, when, and how you will have to report:
- What must be reported? Each company will be required to report four pieces of information about its beneficial owners: name, birthdate, address, and a unique identifying number and issuing jurisdiction from an acceptable identification document (and the image of such document).
- When must companies report? All companies created before January 1, 2024, must submit their initial reports no later than January 1, 2025. All companies formed on or after January 1, 2024, and before January 1, 2025, must report within 90 days after their creation.
- How do companies report? FinCEN launched the BOI (beneficial ownership information) E-Filing website for reporting beneficial ownership information (https://boiefiling.fincen.gov) on January 1, 2024.
In addition to the initial reporting requirement, your corporation, limited partnership or LLC will have to file an updated report within 30 days after any change to any of the reported information. That includes not only a change of owners, but any change to any of the identifying information about each of the owners.
Since the existence of all Arizona companies that will be required to report is a matter of public record, through filings with either the Arizona Corporation Commission (for corporations and LLCs) or the Arizona Secretary of State (for limited partnerships), it will at least theoretically be possible for the Department of the Treasury to monitor and enforce compliance with the reporting rules. I haven’t seen any publicity about any anticipated enforcement measures, although the frequently asked questions section of the FinCEN web site does point out that the Act provides for civil and criminal penalties for noncompliance.
Since I last wrote about it, the government has made some progress in making this reporting requirement less onerous. At least the reporting can be done electronically, rather than submitting paper forms as apparently was originally planned. There’s always the possibility that the whole scheme will be repealed by Congress or invalidated by the courts, but for now, if this applies to you, my advice is to get going on it now.
Nathan B. Hannah is a Shareholder in the Tucson office, and practices in the areas of estate planning and administration, real estate, and commercial transactions. He is also a noted blogger, and you can find more of his articles on his private blog,
Contact Attorney Hannah: nhannah@dmyl.com or 520/ 322-5000
This communication is designed to bring legal developments of interest to the attention of our clients and others. It should not be relied upon as a substitute for specific legal advice in a particular matter. For further information on any of the subjects discussed, or for legal advice in connection with any particular matter, please contact us.
NATHAN B. HANNAH is an Of Counsel attorney in the Tucson office. He practices exclusively in the areas of estate planning, estate and trust administrations, and real estate and commercial transactions. Mr. Hannah has been writing wills and trusts and assisting in the administration of estates and trusts for over thirty years. He has drafted contracts and other documents and assisted in the closings for many real estate transactions throughout Arizona, including farm, ranch, development, and investment properties.
Phone:
520-322-5000
Email:
nhannah@dmyl.com
Office:
Tucson