Critical to understand and comply with the new law despite its challenges and invasiveness.
Since January 1, millions of small entities have been required to report sensitive personal information to the U.S. government like never before. These entities include limited liability companies (LLCs) and trusts that often hold title to aircraft for their sole, ultimate beneficial owners (UBOs).
The Corporate Transparency Act (CTA) is the disclosure law, and the Department of the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) is the chief enforcer. This law imposes potentially significant civil and criminal penalties for the failure or refusal to correctly and timely report all required information. Importantly, the CTA intersects with aviation regulations that may compound penalties.
Did the CTA Veer Off Course?
The reporting obligation was clear until March 1, when an Alabama federal district court in the case of National Small Business United v. Yellen (National) decided that the CTA was unconstitutional. The court halted the Department of the Treasury and FinCEN from enforcing the CTA against the National plaintiffs. In a press release on March 4, FinCEN stated that “the government will not currently enforce the CTA against the plaintiffs.”
Because National seems to apply only to the plaintiffs, UBOs and covered entities may decide on a “better to be safe than sorry” approach. To make that decision and avoid violations of the law, it is critical to understand the technical CTA rules and how to comply with them.
CTA Target Individuals and Entities
Unless exempt, the CTA imposes the obligation on “reporting companies” to submit to FinCEN “information about the reporting company [and] beneficial owner information” (BOI) for each “beneficial owner” of the reporting company plus information about the “company applicants.” Let’s unpack these elements that together sum up the CTA’s process and affected parties.
This article was originally published in AIN by David G. Mayer, AIN Contributor and Partner at Shackelford, Bowen, McKinley & Norton, LLP, on March 8, 2024.