Dusting Off the Blog for News on The Corporate Transparency Act!

 

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Did you know "The Buzz About Taxes" turned ten years old in February this year? This milestone would have almost passed me by if not for the fact that we started working on rebranding the firm and took stock of how far we have come since we started. Here we are, ten years in business and more than 200K views on the blog later, looking to give our brand a fresh look and launching on new adventures. I realize as I look back,  that my blog posts grew less frequent as I got busier with the practice. They just stopped two years ago as I took over completely from my business partner. 

Life happens! Sadly, I have not been regular at writing in the hustle of building up the firm and my practice. I have missed the blog and I have missed writing more! So, here I am, sleeves rolled up, my hair in a bun, dusting off the cobwebs, metaphorical pencil behind my ear, as I read through the latest on foreign tax reporting, I realize the latest buzz about taxes is the Corporate Transparency Act! This perfectly cements the "dusting off cobwebs" metaphor-how about we brush up on the FATF and OECD's quest for the "Dirty Money Trail"? 

Before we go any further, let us talk about FATF and OECD. {Note: These are not your modern day acronyms that encode your text messages such that ol' Sam Morse would be shaking his head in wonder!} The Foreign Action Task Force (FATF) set up by the Organization of Economic Cooperation and Development (OECD) among the many important responsibilities it has, also grades countries on the steps to be instituted to procure beneficial ownership information for entities set up under their laws and within their jurisdictions. 

Over the past decade, we have seen an increase in initiatives by the OECD to deal with "dirty money" which mean initiatives to guard against money laundering, terrorism financing and other illegal ways to clean this dirty money. Most times, the laundering happens via elaborate tax structuring, such as use of trusts, shell companies, inactive companies etc., tax evasion and financial corruption across jurisdictions to hide the identity of the owners, their origin, and true ownership and purpose of assets (including financial accounts). There are many interesting anecdotes and I have links to some of them in the Bibliography at the bottom of this post. 

The passage of the Corporate Transparency Act (CTA) is designed to remove the veil on these complex structures to reveal natural persons behind them. The CTA also aims to preserve the integrity of the US taxation system and protect its law-abiding citizens from money laundering schemes as well as send a message to its OECD  and other global partners that the United States is on board to share information to deal with "dirty money".

Compliance With the CTA Broken Down: 

1. A company files a Beneficial Ownership Information (BOI) report with FinCEN about the company and each of its beneficial owners and applicants. 
2. Every Corporation, LLC or other entity created in a US state or Indian tribe must file a BOI report. 
3. Entities created in a foreign country and registered to do business in the US is required to file a BOI report. 
4. If the domestic reporting company was created before January 1st, 2024, it must file the BOI report by January 1st, 2025. 
5. If the domestic reporting company will be created on or after January 1st, 2024- the BOI report must be filed within 30 days of receiving notice that the formation is effective. {UPDATE 12/31/2023: The FinCEN Guide has now been updated to reflect that the BOI report must be filed within 90 days of receiving notice that the formation is effective.}
6. Any change/ correction in information in #s 4 or 5 should be filed within 30 calendar days when the change occurs. 
7. The form will need to be filed electronically via FinCEN's website. 
8. Exemptions: There are 23 categories of entities which are exempt from this reporting. More information on the exempt categories from Wolters Kluwer here.    

How Do I Prepare for CTA Compliance: 

• Determine if my business is a reporting company and if CTA will apply to me and my company. 
• Determine when I need to file my initial report. 
• Start gathering the required information and make sure it is current at the time of filing. 
• Implement protocol to keep track of the information to make sure the BOI report is updated in case there is a change. 

If you have stuck with me this far, I can imagine you are at the edge of your seat either from sheer excitement to get started (highly unlikely!) or gripping anxiety to make sure you will get everything right! 

Like I always say, never attempt anything this complex on your own. Hire a professional to make sure all your t's are crossed and i's are dotted. 

More information about me is on my website. You can send me a message by dropping a comment below or via the contact form on my website. 

Bibliography: FinCEN Website; National Archives on the Federal Register; MN Tax & Business Services Website; Wolter Kluwer 23 Exemptions to filing BOI Report; An Oligarch and his $90 Million Yacht; Covid Relief Fraud of $24 Million. 

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