September 21, 2023
by Ryan Conklin
Congress passed the Corporate Transparency Act in 2021. Among other things, the CTA requires that millions of businesses report their ownership to the Department of Treasury’s Financial Crimes Enforcement Network.
The CTA could provide a burdensome reporting requirement for ordinary entities operating legitimately. Using these reports, the Department of Treasury seeks to snuff out companies that engage in money laundering, terrorism, tax fraud and other crimes.
The CTA takes effect Jan. 1, and farm families need to plan accordingly. Here are some key points regarding the CTA:
Are you subject to the CTA? Any corporation, LLC or partnership that has been registered with the secretary of state must comply with the CTA.
Are there any exemptions for filing? The CTA provides 23 exemptions for submitting a beneficial interest report. Almost all of these exemptions apply to companies that are already subject to significant federal or state regulation. For now, this seemingly does not include farm-related entities.
What do you need to report to the Department of Treasury? An entity must report its legal name, DBAs, principal place of business, state of formation and tax ID number. The entity must report the beneficial owners who own or control at least 25% of the business. The information for the owners includes legal name, date of birth, residential address, unique identifying number (driver’s license, passport or state ID) and image of the unique identifying number.
If you created a business before Jan. 1, 2024, when do you need to file the report? Entities created before Jan. 1, 2024, must file their beneficial ownership report before Jan. 1, 2025.
What about entities created after Jan. 1, 2024? New entities are required to file a report within 30 days of the secretary of state approving their registration.
What if you change ownership or become exempt later? Changes in ownership or qualification for an exemption also must be reported within 30 days of the change or qualification.
How do you file this report? The Department of Treasury will begin accepting electronic reports on Jan. 1, 2024.
Unfortunately, it looks as though most closely held family farm businesses will be subject to this new law. Thankfully, existing companies will have plenty of time to prepare for compliance, and new businesses in 2024 can begin compliance immediately. To be safe, consulting with your tax professional and legal professional regarding the CTA is strongly recommended.
Conklin is president of the law firm Wright & Moore, which specializes in agriculture and is based out of Delaware, Ohio.
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