UBO Reporting Deadline in the United States Is Almost Here

With the deadline for UBO reporting under the Corporate Transparency Act (CTA), K.A.C. Group reminds its clients who operate US-based businesses, formed before January 1, 2024, of the obligation to prepare and submit such reporting before January 1, 2025. A different deadline may be applicable to your company; find out more in our article.

What Is the CTA?

The Corporate Transparency Act and its implementing regulations were passed by Congress in 2020, becoming effective on January 1, 2024. Its provisions state that companies doing business in the United States are subject to new reporting requirements as part of the national policy to achieve transparency of beneficial ownership information, detect and combat money laundering and proceeds from terrorism and other illegal sources.

In accordance with the Act, companies must report information about their beneficial owners to the Financial Crimes Enforcement Network (“FinCEN”) of the Department of Treasury, which acts as the executive body for the implementation of the CTA.

Reporting and Exempted Entities

The CTA foresees two types of reporting entities:

1) a domestic reporting company: a corporation, limited liability company, partnership, or other similar entities formed by filing a document with the secretary of state or a similar office of a US state or Indian tribe;

2) a foreign reporting company: a corporation, limited liability company, or other similar entity formed under foreign law qualified to do business in the United States by filing a document with a secretary of state or similar office of a US state or Indian tribe.

Trusts are not created by the filing of a document with a secretary of state or similar office, so they are not covered by the regulations.

Some types of entities are excluded from the obligation to report on beneficial owners:

1) large operating companies with the following characteristics: over 20 full-time US employees, operating presence with a physical office in the United States, filing of a US federal income tax or information return for the preceding year with gross sales over $5 million;

2) public companies and other entities registered with the Securities and Exchange Commission (SEC) under the Securities and Exchange Act;

3) entities registered with the Commodity Futures Trading Commission under the Commodity Exchange Act;

4) accounting firms registered with the Public Company Accounting Oversight Board;

5) banks and credit unions;

6) insurance companies and certain insurance brokers;

7) registered investment companies and investment advisers, other pooled investment vehicles operated by other exempt entities;

8) tax-exempt entities;

9) inactive entities.

Entities whose ownership interests are wholly owned or controlled by exempt entities are also exempt.

Reportable Information

Companies are required to provide the following information:

• legal name and alternative names;

• US business address or US primary location;

• jurisdiction of registration;

• taxpayer’s identifying number or, for foreign entities, a taxpayer’s identification number provided by the foreign jurisdiction, with the indication of this foreign jurisdiction.

Beneficial owners are required to provide the following information:

• name;

• date of birth;

• address;

• identifying number, issuer, copy of a valid US driver’s license, passport, or document issued by the state, local government or Indian tribe or, for foreigners, a valid passport.

Closest Deadlines

I. For reporting companies formed or registered before January 1, 2024, the reporting deadline is any time before January 1, 2025.

II. For reporting companies formed or registered on or after January 1, 2024 and on or before December 31, 2024, the deadline is 90 days after whatever occurs first:

1) receipt of actual notice of formation or registration from a secretary of state or similar office;

2) the date on which a secretary of state or similar office first provides public notice of formation or registration.

III. For reporting companies formed or registered on or after January 1, 2025, the deadline will be 30 days after whatever occurs first:

1) receipt of actual notice of formation or registration from a secretary of state or similar office;

2) the date on which a secretary of state or similar office first provides public notice of formation or registration.

Any changes or updates to the UBO information must be reported within 30 days. UBO reports are submitted online through FinCEN’s BOI E-Filing System.

Access to the UBO Register

UBO reports are not publicly available and may be accessed by selected entities:

• US federal agencies engaged in national security or intelligence activities;

• US federal, state, local, tribal, and foreign law enforcement agencies;

• US Department of the Treasury;

• financial institutions (and their regulators) as part of the customer due diligence procedure.

Penalties for Incompliance

The CTA provides for civil penalties (fines of up to $500 for each day the violation continues) and criminal penalties (a fine of up to $10,000, imprisonment for no more than three years, or both). These may be imposed both on the violating company and its senior officer.

Corporate Transparency Act