How many of you have ever heard of “FinCEN?” If you own a foreign bank account, you are already used to filing an information report every year. (If you don’t the penalties are horrendous, including a potential prison sentence!)
Congress passed a new law last year, called the Corporate Transparency Act. This requires almost all small business entities to provide information about their owners to the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). There! Now you know what FinCEN stands for.
CTA does not take effect until 2023 as of right now. FinCEN may defer it longer if they can’t get their act together on regulations, forms, etc.
The main purpose of CTA is to crack down on corruption, money laundering, terrorist financing, tax fraud, and other illicit activity. It targets the use of anonymous shell companies that facilitate the flow and sheltering of illicit money. The CTA will create a massive database containing “Beneficial Owner” information for most types of smaller business entities. Its sole purpose will be for law enforcement, national security, federal regulators who enforce money laundering laws, and intelligence agencies to use.
The CTA has 23 exemptions for most types of larger businesses. Also exempt are any small businesses who have more than 20 full-time employees, have a physical presence in the U.S., and have filed a federal tax or information return the prior year showing more than $5 million in gross receipts or sales.
The CTA goes after all non-exempt business entities. (In Nevada, all businesses file with the Secretary of State… hmmm waiting to hear about further requirements on that.) Overall, FinCEN expects to see over 30 million businesses that will have to file such a report in 2023. Key point to know: These FinCEN reports do not coincide with filing normal Federal Income Tax Returns. New companies just created must file this report within 14 calendar days of being created. Existing companies must file a report no later than one year after the effective date of the final regulations. That means the due date will be sometime in 2023, depending on when exactly these new regulations become final.
“Beneficial Owners” will need to provide full name, date of birth, residential street address (NOT PO BOX), as well as a unique ID number from an acceptable legal document such as a driver’s license or passport. A “Beneficial Owner” is any individual who owns 25% or more of the businesses or who directly or indirectly exercises substantial control over the business. Any changes in “Beneficial Owners” will require a new filing within 30 calendar days after that change. The report must also identify who helped form the business. (Hello Nevada Resident Agents?) Violations for not complying can result in a $500 a day penalty (up to max of $10,000) AND up to two years imprisonment.
Have you heard? Romans 13:3b says, “Do you desire to have no fear of the authority? Do that which is good, and you will have praise from the authority.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com. Also on Facebook.