As of Jan. 1, 2024, a significant number of businesses are required to comply with the CTA. The CTA was enacted as part of the National Defense Act for fiscal year 2021 and requires the disclosure of the BOI of certain entities from people who own or control those entities. Failure to comply with the CTA can be a criminal act or result in a civil penalty. It is important for business to consult with a competent attorney about their specific compliance requirements.
The CTA amended part of the Bank Secrecy Act, a set of federal laws that require recordkeeping and report filing on certain types of financial transactions. Under the CTA, BOI reports will be filed with FinCEN, an agency of the U.S. Department of the Treasury.
Crowe observation
Entities organized both inside and outside the U.S. might be subject to the CTA BOI reporting requirements.
Domestic companies required to report include corporations, limited liability companies (LLCs), or any similar entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.
The CTA exempts 23 categories of entities from the BOI reporting requirements, including publicly traded companies, banks and credit unions, securities brokers and dealers, public accounting firms, tax-exempt entities, and certain large operating entities.
Different filing time frames apply depending on when an entity is registered/formed or if there is a change to the beneficial owner’s information.
- New entities created or registered after Dec. 31, 2023, must file within 30 days of formation. The 30-day time frame is extended to 90 days for entities created in 2024.
- Existing entities created or registered before Jan. 1, 2024, must file by Jan. 1, 2025.
- Reporting companies that have changes to previously reported information or discover inaccuracies in previously filed reports must file within 30 days of the change or discovery of the inaccuracy.
Looking ahead
In March 2024, a federal district court in the Northern District of Alabama concluded that the CTA BOI reporting requirements were unconstitutional and enjoined FinCEN from enforcing the CTA against members of the National Small Business Association, plaintiffs in the case. FinCEN indicated it would comply with the court order regarding members of the National Small Business Association as of March 1, 2024. FinCEN has filed a notice of appeal in the case. More legal challenges are likely.
Although entities subject to the Jan. 1, 2025, filing date might wish to delay compliance with reporting until later in 2024 to monitor the progress of the National Small Business Association case, they should work with their advisers to be prepared to comply by the due date if necessary. Willful noncompliance with the CTA BOI reporting requirement can result in criminal and civil penalties of $500 per day up to $10,000 and up to two years of jail time. Information about the CTA can be found on the FinCEN website.
