January 1, 2024: Ready or Not, Here Comes the CTA – What Businesses Must Do Now
If you are the owner or partner in a business or LLC, you had better be ready to comply with the Corporate Transparence Act (CTA) or you could face huge fines and jail… and you can thank Establishment Republicans for it.
The Corporate Transparency Act (CTA) was passed as part of H.R.6395 – National Defense Authorization Act with unprecedented speed by Congress after the 2020 election, vetoed by President Joe Biden, and then immediately overridden before the new Congress was to take their seat. It was a very controversial move at the time and many conservatives cried foul. As part of the CTA, the act introduces a Beneficial Ownership Information (BOI) reporting requirement as part of the US Treasury “Financial Crimes Enforcement Network” (FinCEN). Here, we delve into the intricacies of the CTA, shedding light on reporting obligations, exemptions, penalties, and the divergent votes among Texas Republicans.
Congressional Override and Divergent Votes:
In a move emblematic of the intense debates surrounding the CTA, Congress opted to override Biden’s veto, solidifying the legislation as law. However, the process laid bare the deep divide among Texas Republicans. Notable representatives from Texas, such as Arrington, Babin, Burgess, Cloud, Gohmert, Gooden, and Weber, voted against the CTA, expressing concerns about the hurried legislative process and potential adverse effects on businesses. Conversely, supporters, including Representatives Brady, Conaway, Crenshaw, Flores, Granger, Hurd, McCaul, Olson, Taylor, Thornberry, and Williams, argued in favor of the urgency to combat financial crimes, emphasizing the benefits of increased transparency.
On the Senate side, Senator Cornyn voted in favor while Senator Cruz voted in opposition to the NDA. Of course, do we even need to note that every Democrat from Texas voted for this legislation.
Reporting Obligations:
The CTA mandates reporting companies to disclose Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN). This includes identifying information about individuals who directly or indirectly control a company. Domestic reporting companies, encompassing corporations and limited liability companies formed within the United States, and foreign reporting companies registered to do business in the U.S., are subject to these reporting obligations.
The reporting process, slated to commence on January 1, 2024, necessitates the submission of BOI reports through the FinCEN website (https://www.fincen.gov/boi). While sole proprietorships are generally exempt, those created or registered to do business in the U.S. through specific filings fall under reporting requirements.
Exemptions and Exceptions:
Understanding the exemptions is crucial for businesses navigating the complexities of the CTA. The legislation explicitly outlines 23 types of entities exempt from reporting requirements, requiring careful review of qualifying criteria. Entities obtaining an IRS employer identification number, a fictitious business name, or a professional or occupational license without creating a new entity are not classified as reporting companies.
Certain foreign officials, with approval through a U.S. Federal government agency request, may access beneficial ownership information for activities related to national security, intelligence, and law enforcement. Financial institutions may also access information under specific circumstances with the consent of the reporting company.
Penalties for Non-Compliance:
The CTA imposes penalties for willful failure to report complete or updated beneficial ownership information. Civil penalties, including fines of up to $500 for each day of violation, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000, underscore the significance of compliance. Moreover, senior officers of an entity failing to file a required BOI report may be held accountable for that failure.
The penalties are designed to encourage businesses to adhere to the reporting requirements specified by FinCEN, underscoring the gravity with which lawmakers approach the imperative of enhanced financial transparency. As the CTA rapidly approaches implementation, businesses stand at a crucial juncture, grappling with the necessity of compliance and weighing it against apprehensions regarding potential intrusions and administrative burdens.
So if you have a buisness or even an LLC, you better be ready to hand over your information, or face severe consequences… thanks to these Texas Legislators that you elected.