Presented by Ross Keogh - Parsons Behle & Latimer

1. parsonsbehle.com
The Corporate Transparency Act
What You and Your Clients Need to Know About the Upcoming
Requirements for Beneficial Ownership Reporting

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Legal Disclaimer
This webinar is based on available information as of November 17, 2022,
but everyone must understand that this webinar is not a substitute for
legal advice. This presentation is not intended and will not serve as a
substitute for legal counsel on these issues.

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 Congress enacted the Corporate Transparency Act (“CTA”) on
January 1, 2021 as part of the National Defense Authorization Act of
2021.
o Overrode veto by President Trump
 Final Rule issued on September 30, 2022
 Regulations effective January 1, 2024
 Reporting starts January 1, 2024 and must be completed by
January 1, 2025.
Introduction

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CTA – Basics
 Requires entity level reporting to FinCEN of “personally identifiable
information” of “beneficial owners” of all US registered entities (LLC,
INC, LLP) .
 FinCEN is an arm of Treasury which safeguards the US Financial
system from illicit use.

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CTA – Why?
 Few jurisdictions in the US require disclosure of the individuals who
own or control an entity.
 US shell companies are being used for financial crimes and the
evasion of sanctions.
 No uniform reporting requirement.

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Wyoming Example

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What is a Reporting Company?
 Corporation
 Limited liability company;
 Created by the filing of a document with a secretary of state or any
similar office under the law of a State of Indian tribe; or
o LP, LLP, LLLP, but not a general partnership or trust (unless registered with
the a State).
 A foreign entity registered to do business in the US.

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Reporting Company – Initial Report
 The full legal name of the
reporting company
o BOYLE, DEVENY & MEYER, P.C.
 Any trade name or doing
business as names
o BDM
 A complete current address
 The State/Tribal/Foreign
jurisdiction of formation
 EIN/TIN
 Each “beneficial owner”

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 Full legal name
 Date of birth
 Complete legal address
o Residential address of the individual for residency purposes
 A unique identifying number and the issuing jurisdiction from a:
o Non-expired US passport
o Non-expired driver’s license
What Must Be Reported For Each Individual

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FinCEN Identifier
 Individuals and reporting companies may obtain a FinCEN identifier
by submitting the applicable information.
 The FinCEN identifier will be the easiest way to streamline reporting
of multiple tiered entities and should be routinely collected and
maintained.
 Allows for beneficial owners to limit disclosure of upstream
information.

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Large Reporting Company Exemption
 Large reporting company:
o Employs more than 20 FTEs;
o Has an operating presence in the US; and
o Federal tax return with more than $5 million gross receipts
(1120/1120S/1065—maybe Schedule C?).

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Exemptions (already regulated)
 Governmental entity
 Bank/Credit Union
 Investment Company
 Securities Exchange Act registered entity
 Insurance company
 Accounting firm registered under Section 102 of Sarbanes-Oxley
Act
 Public Utility
 Tax-Exempt entity

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Exemptions – Subsidiary/Inactive
 Entities in existence prior to 2020 that:
o Are not owned by a foreign person;
o Not engaged in active business;
o Has not received funds > $1k; and
o Does not own an asset.
 Entities that are wholly controlled by certain exempt entities.
o I.E. a SMLLC owned by a 501(c)(3)

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Who is a Beneficial Owner?
 "Beneficial owner" means, with respect to an entity, an individual
who, directly or indirectly, through any contract, arrangement,
understanding, relationship, or otherwise:
 Exercises substantial control over the entity, or
 Owns or controls not less than 25% of the ownership interests
of the entity.

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Ownership Interest
 Equity/stock or similar instruments
 Any capital or profits interest
o Appears that both are tested independently.
 Convertible instruments
 Trusts:
o Trustee with authority, or beneficiary if:
• Is the sole beneficiary; or
• has the right to demand distributions or withdraw substantially all of the assets from the
trust; or
• Grantor/settlor who right to revoke or withdraw assets.

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 Minor
 Custodian
 Employee, but only to the extent they are not a “senior officer”
 An individual with a future inheritance right
 A creditor (unless a beneficial owner)
Ownership Interest – Exceptions

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Substantial Control
 Direct:
o Senior officer—president, CFO, general counsel, CEO, COO, and similar
o Authority over the appointment or removal of any senior officer or a majority
of the board of directors
o Directs, determines, or has substantial influence over major decisions—
principal assets, reorganization, major expenditures
 Indirect:
o Board representation
o Ownership of majority of voting rights
o Contractual arrangements (including through subsidiaries)

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Continuous Update
Changes must be updated to FinCEN within 30 days.
New entities must file within 30 days.

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Beneficial ownership disclosure information (“BOD
information”) is confidential and cannot be disclosed by (a) a
U.S. officer or employee, (b) an officer or employee of any
State, local, or Tribal agency, or (c) an officer or employee of
any financial institution or regulatory agency receiving the BOD
information under the CTA.
Retention and Disclosure of BOD Information
by FinCEN

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FinCEN may disclose BOD information upon receipt of a
request made by a financial institution subject to FinCEN’s
customer due diligence rule (“CDD”), with the consent of the
reporting company, to facilitate compliance of the financial
institution with CDD requirements under applicable law.
Retention and Disclosure of BOD Information
by FinCEN – continued

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Creation of a Beneficial Ownership Registry –
continued
 Although the database is nonpublic, FinCEN is allowed to share
information with state and local governments, and most foreign
governments, and (with consent of the disclosing entity) financial
institutions.

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 Civil penalties of not more than $500 for each day that violation
continues.
 Fine of not more than $10,000 or 2 years’ imprisonment, or both.
Penalties for Willful Reporting Violations

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Safe Harbor for Inaccurate Report
 Person not subject to civil or criminal penalty if the person has
reason to believe that any report submitted by the person contains
inaccurate information and voluntarily and promptly (i.e., not more
than 90 days after the date the person submitted the report)
submits a report containing corrected information.

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Penalties for Unauthorized Disclosure or
Use Violations
Civil penalties of not more than $500 for each day that violation
continues.
Fine of not more than $250,000 or 5 years’ imprisonment, or
both.

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 While violating another federal law or as part of a pattern of any
illegal activity involving more than $100,000 in a 12 month period, a
fine of not more than $500,000 or 10 years’ imprisonment, or both.
Penalties for Unauthorized Disclosure or
Use Violations – continued

26. Thank You

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For more information, contact:
 Ross Keogh
406.317.7241
rkeogh@parsonsbehle.com