The impact will be far-reaching as FinCEN’s regulations require the reporting of beneficial ownership information by some 32 million business entities operating in the U.S. and its territories (by FinCEN’s estimates).
After the confetti has fallen, the champagne corks have popped and we awaken on January 1, we will find ourselves in a new year with a set of regulations imposed on us by the Financial Crimes Enforcement Network (FinCEN) pursuant to the Corporate Transparency Act (CTA) in full force. Those regulations will have a far-reaching impact on millions of companies doing business in the U.S.
Since the issuance of our prior Alert in September, we have inexorably inched closer to the CTA’s effective date of January 1, 2024. But now, as the winter solstice approaches and the days become ever shorter, the time remaining to prepare for the CTA also becomes ever shorter. In addition, FinCEN has adjusted some of its regulations and issued amended guidelines. But those adjustments and amended guidelines do not add days to the calendar or delay the January 1 effective date of the CTA.
The impact will be far-reaching as FinCEN’s regulations require the reporting of beneficial ownership information by some 32 million business entities operating in the U.S. and its territories (by FinCEN’s estimates). Only entities that fall within one of a list of often complex exemptions will not be required to report their beneficial ownership information. Nonexempt entities will be required to report their beneficial ownership information whenever a new entity is created or first registered to do business in the U.S. and whenever previously reported ownership information changes. And remember―FinCEN’s CTA mandates have the full force of U.S. federal criminal law behind them as an added incentive to assure compliance.
Although enforcement of the regulations will likely be in flux while FinCEN implements this unprecedented scheme during the first few weeks of 2024, it will be important to follow these developments closely in order to not be caught unawares in a regulatory trap.
The most recent formal amendment is the change of the initially described requirement to file reports concerning new entities first formed or first registered to do business in the U.S. or its territories in 2024 within 30 days of such formation or registration to within 90 days of such formation or registration.
However, this lengthened initial filing period applies only to formation or registration occurring during 2024. In other words, entities existing before January 1, 2024, still must file information regarding their beneficial owners with FinCEN by January 1, 2025. Entities created on or after January 1, 2024, and before January 1, 2025, will now have 90 days (not the previously mentioned 30) following their creation to make such a filing. Entities created on or after January 1, 2025, will have only 30 days to make their initial FinCEN filing.
As 2023 continues its unstoppable course toward 2024, we urge that you begin planning now for how to determine whether the regulations will apply to your business entity―or if your entity will qualify for one of the nearly two dozen complex exemptions from the regulatory requirements.
About the Duane Morris CTA Strategy Team
Duane Morris’ multipractice CTA Strategy Team has been studying the CTA and guidance from FinCEN and stands ready to assist in determining the impact of the new law on our clients, as well as recommending actions to take to comply with the CTA.
Duane Morris will continue to publish Alerts providing information about the CTA to assist in compliance and to help answer any questions arising from the CTA. We suggest everyone review and study the FinCEN guidelines for the most current views from the U.S. Department of the Treasury and encourage you to reach out to any of us with questions.
For More Information
If you have any questions about this Alert, please contact Thomas R. Schmuhl, Jocelyn Margolin Borowsky, Joel N. Ephross, Bruce H. Jurist, Hope P. Krebs, Lee J. Potter Jr., any of the attorneys in our Corporate Transparency Act Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.