Corporate Trasparency Act | Benenficial Reporting | OH IN KY

The Corporate Transparency Act & Beneficial Owner Reporting | Video Transcript

Linda Weigand
Lauren Huster
September 2023

Linda Weigand: Hi, thank you for joining us today. We’re here to talk about the Corporate Transparency Act. I’m Linda Weigand, a director at Barnes Dennig. I’m here with Lauren Huster, another director in the tax division. Lauren, do you want to tell us a little bit about what’s going on with the Corporate Transparency Act?

Lauren Huster: Yeah. So the CTA, the Corporate Transparency Act, came about in 2020, but it’s actually going to come into effect to do the reporting for 1/1/24 to 1/1/25. So really the 2024 calendar year, and I’m going to walk through some of the

But what it’s looking for is trying to combat terrorism funding, money laundering, those types of items. So the Federal Enforcement Crimes Network, I’m going to call it FinCEN for the rest of this, is in charge of it. And they are going to be in charge of collecting all of the data that a company has to report for themselves. So really what’s coming up is all of the entities that don’t meet an exemption are going to file information on who owns them, who controls them, and who helps set them up. And they have this whole calendar year for 2024.

The FinCEN is working on setting up what that’s going to look like. They’re going to have to do like a website log on. The company will do it themselves, but it is still a work in progress.

Linda Weigand: So the FinCEN, just for folks who might be familiar with this, that’s for those that have to report an FBAR or file an FBAR every year, same agency.

Lauren Huster: Same agency. Yeah. So it’s not the IRS. It is a separate entity, and they do have higher penalties. So when we get into this, if you don’t do this filing, it could be a $500 fine a day, up to $10,000. Also, potential jail time. So they’re really high penalties with anything international because they’re really just trying to combat the money laundering and those types of items. So yeah, it’s a different agency that’s coming out, but we’re talking about it because it’s going to affect a lot of our clients. So to walk through exemptions, probably the biggest one that’s going to help people get exempt from this. We think a lot of small businesses getting exemptions just to not overwhelm them, but the main exemption is going to be focused towards larger companies getting out of this filing requirement. So the first one, a large organization, what is it defined as?

There are going to be three requirements. The first one’s going to be that there’s over $5 million of sales, 20 employees, and then a US office location. And if you meet all three of those, then you are a large corporation, and you do not have to file everything that we’re talking about. So if that’s you, you can turn us off.

But the $5 million looks at it on a controlled basis, but the employees does not. So to give an example of it is if you had two companies, Company A and Company B, and they both had $3 million of sales and they were related, same owner, one had 5 employees and one had 25 employees, the one that had 5 would need to file because it had less than 20 employees.

So it would be over the $5 million because you look at it on a combined basis. So it would have $6 million in sales, but it would only have 5 employees so they would need to file. Company B would still be over that $5 million, would have over 20 employees, and an office in the US, so they wouldn’t need to file.

Linda Weigand: So Lauren, what if you’re on the cusp of the employees? What if you’re targeting 20 employees, you’re not quite there, you might be there during the year of inception, what do you do?

Lauren Huster: So currently what it’s trying to capture, all of these rules is trying to capture all of the companies in existence prior to 1/1/24. So if you haven’t met those requirements, if you’re below the 20 employees, you will need to file. And it is
looking at full-time employees. But this isn’t a one-time filing. Anytime there’s a change or your situation changes.

So you say you’re on the cusp, you’re under 18, you had to file, but let’s say you’re at 20 then you didn’t have to file, but you dropped down to 15. You would then need to file as your situation changes. So this is something that you’re going to have to continuously look at, and also something that as information changes, you’re going to have to update within 30 days. So it’s going to be something that needs to be in the back of people’s mind. And then, as new companies are being set up post 2024, the individual helping set up the company should probably do all of this, so you don’t need to worry about it. But
again, as changes get made, you’re going to need to report it to the FinCEN.

Linda Weigand: But it’s not necessarily an annual filing like your FBAR?

Lauren Huster: Correct. Yeah, definitely not an annual filing. So some examples of information, we talked about a beneficial owner and those that set up the company, but what are you reporting? So for a beneficial owner, we’re looking at those that
are over 25% owner or someone that controls the company. So think of a company like a CEO that controls the company but doesn’t have any ownership.

You may need to report his information. And you’re looking at what’s their name, what’s their date of birth, what’s their address, what’s their home address, as that’s an important key. Their home address, and then you’re also providing the documentation, whether it be a driver’s license, a passport. So you can see these aren’t hard things to probably report, but it’s going to be burdensome.

Linda Weigand: And you have to remember the 30 days. You have a change, you have only 30 days to report that. I think it’s important to note that this is a disclosure. It’s further information that you’re providing to the government. It’s unlikely it’s
going to result in any money out of pocket to you unless they discover something. But this is just information. So once you get that information filed and you have it on your radar to make any reporting of any changes that you have within 30 days, you’re going to be okay with that.

Lauren Huster: Yeah, it’s just going to be the time and the effort spent to get all the information. And I think the first-time filing should be the hardest just because you’re trying to figure out exactly who qualifies and getting all their passports,
just the identification aspect of it.

Linda Weigand: So again, what’s the due date for the first time you have to file this?

Lauren Huster: So all companies that are in existence will have to file during 2024. So the website should be open as of 1/1/24 and it will go through the end of the year. And then for any company starting after that, they have 30 days from
incorporation to report. That’s the initial filing.

Linda Weigand: All right. Good. Well, thank you so much, Lauren.

Lauren Huster: Of course.

Linda Weigand: All right. Thank you for joining us.

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