Many observers have expressed concern that a deluge of last-minute filings at the end of this year could overwhelm the FinCEN filing system.
Under the Corporate Transparency Act (CTA), U.S. entities in existence and foreign entities registered to do business in the United States as of January 1, 2024 (collectively, “existing entities”), face a nonextendable deadline of January 1, 2025, to file their initial beneficial ownership reports (BOIRs) with the U.S. Department of Treasury Financial Crimes Enforcement Network (FinCEN). A BOIR must disclose the identity of all “beneficial owners” of the reporting entity and must include personal identifying documentation for each of those beneficial owners. A failure to file a BOIR via FinCEN’s electronic system as of the January 1, 2025, filing deadline can result in the imposition of civil and criminal penalties.
FinCEN previously estimated that it would receive around 32 million BOIRs from existing entities this year. But as of July, FinCEN indicated only approximately 5 million BOIRs had been submitted. Many observers have expressed concern that a deluge of last-minute filings at the end of this year could overwhelm the FinCEN filing system. We are hearing that some third-party service providers are considering establishing dates (currently as early as December 1) after which they will no longer guarantee timely filing by January 1, 2025, of BOIRs for existing entities. We urge all existing entities that may be considered reporting companies under the CTA to waste no time conducting the potentially time-consuming processes of assessing the availability of any exemptions under the CTA and, if no exemption is available, determining their beneficial owners, compiling the required information and filing their BOIRs.
It is worth noting that the January 1, 2025, deadline applies even to existing entities that are in the process of dissolving or have recently dissolved. According to guidance issued by FinCEN, if a nonexempt entity continued to exist for any period of time on or after January 1, 2024 (i.e., it did not entirely complete the process of formally and irrevocably dissolving before January 1, 2024), then it is required to file a BOIR, even if the company subsequently did entirely cease to exist.
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Duane Morris is actively monitoring developments regarding the CTA and issuing Alerts on the topic. Duane Morris will provide advice to clients regarding CTA compliance only when explicitly engaged to do so in writing.
For More Information
If you have any questions about this Alert, please contact Thomas R. Schmuhl, Jocelyn Margolin Borowsky, Joel N. Ephross, Bruce H. Jurist, Hope P. Krebs, Lee J. Potter Jr., any of the attorneys in our Corporate Transparency Act Group, the attorney in the firm with whom you are regularly in contact, or Michael A. Gillen or any of the professionals in the Tax Accounting Group.
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