RBC | Congress passed the Corporate Transparency Act (CTA) in 2021 in an effort to combat money-laundering, tax evasion and financing of terrorist activities. The Act requires almost all corporations, partnerships and LLCs in the United States, including small businesses, to report what is called “Beneficial Ownership Information” to the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”).
The law went into effect Jan. 1, 2024. Affected businesses that fail to report could face fines or penalties of up to $500 a day among other civil and criminal penalties. Affected businesses that formed in 2024 have 90 days to file while existing businesses must report their information by the end of 2024.
The National Small Business Association (NSBA) went to court over the law, claiming it violates Congress’s Article 1 powers and the Fourth Amendment’s protections against unlawful search and seizure. In March, an Alabama federal district court agreed with the NSBA. That case is now in circuit court appeals and multiple other cases have been filed in several states. Bills to repeal the CTA were introduced in both the House and Senate in May 2024.
Meanwhile, the Business Support Division of the Colorado Office of Economic Development and International Trade (OEDIT) is raising awareness about the new law and encouraging affected businesses to file reports before the Dec. 31, 2024 deadline to avoid possible penalties.
There are 23 listed categories of exemptions to the CTA, including: 1. Securities Reporting Issuer 2. Governmental Authority 3. Bank 4. Credit Union 5. Depository Institution Holding Company 6. Money Transmitter Business 7. Broker or Dealer in Securities 8. Securities Exchange or Clearing Agency 9. Other Exchange Act Registered Entity 10. Investment Company or Investment Adviser 11. Venture Capital Fund Adviser 12. Insurance Company 13. State-Licensed Insurance Producer 14. Commodity Exchange Act Registered Entity 15. Accounting Firm 16. Public Utility 17. Financial Market Utility 18. Pooled Investment Vehicle 19. Tax-Exempt Entity 20. Entity Assisting a Tax-Exempt Entity 21. Large Operating Company 22. Subsidiary of Certain Exempt Entities 23. Inactive Entity.
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