The Corporate Transparency Act (CTA), enacted to stop financial crimes, casts a broad net over various entities, including trusts, nonprofits, startups, and subsidiaries. Its provisions aim to enhance transparency in corporate structures and ownership. However, recent legal developments and nuanced regulations have raised questions and implications for these diverse entities.
The cornerstone of the CTA mandates the filing of a Beneficial Ownership Information (BOI) report by corporations, Limited Liability Companies (LLCs), and other entities not exempted. The Act delineates criteria for exempt entities, including large operating companies, tax-exempt organizations, and subsidiaries of exempt entities. Notably, entities created or registered before 2024 must file by January 1, 2025, while those established thereafter have varying deadlines.
A recent federal district court ruling in Alabama declared aspects of the CTA unconstitutional, igniting debates over federal authority. While the ruling enjoined enforcement against specific plaintiffs, the Treasury Department’s subsequent appeal underscores ongoing legal battles and regulatory uncertainties. Despite this, the Financial Crimes Enforcement Network (FinCEN) remains steadfast in enforcing BOI reporting for non-plaintiff entities.
Trusts, often intricate legal structures, face complexities under the CTA. While trusts may be subject to BOI reporting if created or registered with the state, exemptions exist, particularly for those falling under specific categories or registering jurisdictionally. The determination of beneficial owners, excluding trusts themselves, adds another layer of intricacy, emphasizing the need for precise assessment in trust-related cases.
