It is official. The Corporate Transparency Act (“CTA”) is here and, for now, is here to stay. Companies of all types are now obligated to comply with its requirements and have until December 31, 2024 to do so or risk facing significant penalties. So, what is the Corporate Transparency Act? This Federal law, enacted in 2021, was put in place in an effort to combat criminal activity such as tax fraud, money laundering and financing for terrorism. The idea is that by understanding and having more information on the individuals that own and/or control businesses, the federal government will be better equipped to stop these types of criminal activity. The requirements are simple, if your company is covered by the CTA then you must submit a Beneficial Ownership Information Report to the Federal government – more specifically the U.S. Department of Treasury.
Does your company fall under the requirements of the CTA? Most likely, yes. The CTA specifically exempts larger companies and 501(3)(c) not-for-profits along with a few other specific types of entities. But, unfortunately, the majority of associations and companies in Illinois and Indiana will not qualify for an exemption.
So, who within the association/company must report information? While the association/company itself has some reporting requirements, specific individuals within the organization have reporting requirements as well. Individuals with significant ownership or control over the company are considered “beneficial owners” and are required to provide certain identifying information. There are two types of individuals in associations/companies this will most likely affect: board members who are considered to have significant control of the company; and any member of the association or company owns more than 25% of the units/property/shares.
The individuals described above must report certain identification information. This includes names, address(es), date of birth and some form of identification such as a passport/drivers’ license number. All of this information, along with identifying documentation will be submitted on the Beneficial Ownership Information Report. It is important to note that most, if not all, of the information being submitted is information the federal government already has in its possession.
Now that the CTA is in place, when must the Beneficial Ownership Information Report be submitted? The answer to that question depends on several factors. If the Association/company was created on or after January 1, 2024 the reporting must be submitted 90 days from the date the Association/company was formed. Starting after January 1, 2025 this time frame will be reduced to 30 days. If the Association/company was created prior to January 1, 2024 the reporting must be submitted by December 31, 2024. It is important to note, however, that once the information is reported, if that information changes, the association/company now only has 30 days to update the report. Therefore, it is highly recommended that if the association/company has an annual meeting still to occur in 2024, the association/company wait until after that meeting to do your first Beneficial Ownership Information Report. This will ensure that you do not fall into the shortened deadline of 30 days rather than the December 31, 2024 deadline.
These requirements should be taken seriously – the Federal Government sure does. The penalties against an entity for not submitting the report include $500 each day the report in not submitted (or willfully file a false report), an up to $10,000 fine and/or up to two years in prison.
We’re Here to Help
Costello Sury & Rooney can assist with all of the requirements being imposed on your association/company by the Corporate Transparency Act. We are here to help answer any questions you may have including whether your association/company is exempt, who has to report and when and what to do if a board member or other required reporting individual refuses to provide their information. Additionally, we can assist with the submission of the Beneficial Ownership Information Report and will make the process as smooth and quick as possible. Please reach out to us at admin@csrlawfirm.com or find any of our contact information on our website at www.csrlawfirm.com if you would like to speak to a specific Attorney.
CLICK HERE to get started filing the necessary reports.
This article is being provided for informational purposes only. This article does not constitute legal advice on the part of Costello Sury & Rooney. or any of its attorneys. No association, board member or any other individual or entity should rely on this article as a basis for any action or actions. If you would like legal advice regarding any of the topics discussed in this article and/or recommended procedures for your association going forward, please contact our office.