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In National Small Business United, d/b/a the National Small Business Association, et al., v. Yellen, et al., the United States District Court for the Northern District of Alabama ruled that the Corporate Transparency Act (CTA) is unconstitutional.

The Court reviewed the federal government’s assertions that the CTA falls within the scope of the Commerce, Taxing, and Necessary and Proper Clauses and under Congress’ foreign affairs and national security powers. Ultimately, the Court held that the Constitution does not authorize the CTA. The Court went on to conclude that the CTA “cannot be justified as an exercise of Congress’ enumerated powers.”

The federal government will likely appeal to the United States Court of Appeals for the Eleventh Circuit, but the district court’s decision could encourage similar constitutional challenges to the CTA.   

FinCEN’s press release concerning the ruling, which can be accessed here, indicates that it views the judgment as enjoining enforcement against only (i) Isaac Winkles and the National Small Business Association (NSBA), the plaintiffs in the case; (ii) reporting companies for which Isaac Winkles is the beneficial owner or company applicant and (iii) members of the NSBA as of March 1, 2024. The CTA’s reporting requirements otherwise remain in effect, and those not exempted from the Act’s requirements remain subject to enforcement and penalties for noncompliance.

Unless and until the Act is struck down in a final, non-appealable ruling, reporting companies should continue to adhere to CTA filing requirements.

For further questions regarding this update, contact Liskow attorneys Leon Rittenberg III, Julie Chauvin, Marilyn Maloney, Trey Reymond and Ben Parks and visit our CTA website page.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney-client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

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The Corporate Transparency Act (the “CTA”) will become effective on January 1, 2024.  Entities in existence prior to that date that would otherwise obligated to make filings with the United States Department of the Treasury Financial Crimes Enforcement Network (“FinCEN”) have until January 1, 2025 to comply.  However, entities formed after January 1, 2024 had a much shorter compliance period.  Under the original regulations promulgated on September 30, 2022, newly formed entities would have only 30 days following “notice of their creation or registration” to comply with the filing requirements.  FinCEN published a notice of proposed rulemaking on September 28, 2023 and the final regulations were just promulgated on November 30, 2023 that would extend the initial filing period to 90 days. The new rule, along with the CTA, becomes effective on January 1, 2024.  As a result, an entity formed on or after January 1, 2024 but prior to January 1, 2025 that is otherwise obligated to file under the CTA has up to 90 days to comply with the initial filing requirements.  Entities formed after January 1, 2025 continue to be subject to the 30-day filing requirement.

The CTA, 31 U.S.C. 5336, can be accessed here: https://www.fincen.gov/sites/default/files/shared/Corporate_Transparency_Act.pdf

Regulations under the CTA, 31 CFR 1010.380, can be accessed here:

https://www.fincen.gov/sites/default/files/shared/31_CFR_1010_380_excerpt_from_Final_Rule.pdf

Final rule extending the initial reporting period can be accessed here:

https://www.govinfo.gov/content/pkg/FR-2023-11-30/pdf/2023-26064.pdf

Reach out to Liskow attorneys Marilyn MaloneyLeon Rittenberg, and Julie Chauvin for further information regarding the Corporate Transparency Act, and visit our resource page here.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney-client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

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Unfortunately, there are always people out there looking for new ways to steal our personal information.  The latest scam?  Sending ominous warnings that personal information must be filed immediately with bogus or non-existent entities pursuant to the Corporate Transparency Act.

There have been many alerts that have indicated that the Corporate Transparency Act (the “CTA”) will require many corporations, limited liability companies, and similar entities, to file information with the United States Department of the Treasury Financial Crimes Enforcement Network (“FinCEN”).  The CTA was enacted to assist the government to identify terrorists, drug dealers, and other illicit operators who hide behind a maze of entities to launder money and shield other bad actions.

However, be warned that neither FinCEN nor any other governmental agency is sending demands for personal information.  All filings required by the CTA will only be made online at a secure website to be established by FinCEN and no filings will be required prior to January 1, 2024.

What to do?

If you or your client received a letter or email demanding information DO NOT REPLY.  You can either delete the message or forward it to the Better Business Bureau Scam Bureau at bbb.org/scamtracker  and then delete it.  In addition to alerts from the Better Business Bureau, FinCEN has posted an alert at its website, https://www.fincen.gov/boi.  The FinCEN website includes links to the CTA and FinCEN regulations as well as materials to assist small businesses in understanding and complying with their obligations under the CTA.

Reach out to Liskow attorneys Marilyn Maloney, Leon Rittenberg, and Julie Chauvin for further information regarding the Corporate Transparency Act, and visit our resource page here.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney-client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

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Under the Corporate Transparency Act companies are generally required to report detailed information about their beneficial owners, commencing January 1, 2024.  On November 7, 2023, The United States Treasury issued amendments to its regulations with respect to reporting for tiered entities where the lower tier entities have precisely the same owners.  In this instance, in lieu of separately reporting details about the lower tier entity, the lower tier entity may report by providing a FinCEN Identifier (think known traveler number).  Specifically, the amendment provides:

§ 1010.380 Reports of beneficial ownership information. (B) A reporting company may report another entity’s FinCEN identifier and full legal name in lieu of the information required under paragraph (b)(1)(ii) of this section with respect to the beneficial owners of the reporting company only if: (1) The other entity has obtained a FinCEN identifier and provided that FinCEN identifier to the reporting company; (2) An individual is or may be a beneficial owner of the reporting company by virtue of an interest in the reporting company that the individual holds through an ownership interest in the other entity; and (3) The beneficial owners of the other entity and of the reporting company are the same individuals.

Should you have questions about this new rule or about general Corporate Transparency Act matters, feel free to reach out to Leon Rittenberg III, Julie Chauvin or Marilyn Maloney.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney-client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

Privacy Policy: By subscribing to Liskow & Lewis’ E-Communications, you will receive articles and blogs with insight and analysis of legal issues that may impact your industry. Communications include firm news, insights, and events. To receive information from Liskow & Lewis, your information will be kept in a secured contact database. If at any time you would like to unsubscribe, please use the SafeUnsubscribe® link located at the bottom of every email that you receive.

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On Friday, September 29, 2023, the Treasury Department published a notice of information collection under the Corporate Transparency Act (the “Act”) in the Federal Register.  The notice invites written comments on or before October 30, 2023, regarding the proposed forms to be used in reporting the beneficial ownership information of entities subject to the Act.  In particular, the notice addresses the issues that entities may encounter when a beneficial owner cannot be contacted or fails or refuses to provide the information required under the Act in a timely manner.  As failure to provide information timely (or at all) may subject an entity to significant fines, Treasury is considering revisions to the form that would allow entities to reply timely with available information while noting the reasons for incomplete submissions.  However, it notes that a timely but incomplete filing would not satisfy the requirements of the Act.

Interested persons may submit comments regarding this proposal to:

www.reginfo.gov/public/do/PRAMain.

A link to the notice is at:

https://www.federalregister.gov/documents/2023/09/29/2023-21293/agency-information-collection-activities-submission-for-omb-review-comment-request-beneficial

Contact Liskow attorney Marilyn C. Maloney for further questions regarding this topic.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney-client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

Privacy Policy: By subscribing to Liskow & Lewis’ E-Communications, you will receive articles and blogs with insight and analysis of legal issues that may impact your industry. Communications include firm news, insights, and events. To receive information from Liskow & Lewis, your information will be kept in a secured contact database. If at any time you would like to unsubscribe, please use the SafeUnsubscribe® link located at the bottom of every email that you receive.

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On Friday, September 29, 2023, the Treasury Department updated its Frequently Asked Questions regarding compliance with the Corporate Transparency Act’s beneficial ownership and control reporting rules.  These are available at:

https://www.fincen.gov/sites/default/files/shared/BOI_FAQs_Q&A_09.29.23._508C.pdf

While these FAQs do not supplement or modify any obligations under the statute or regulations, they may be helpful to companies and their counsel in navigating the requirements and timing of the Corporate Transparency Act. The Financial Crimes Enforcement Network of the Treasury Department contains links to the Act, the Regulations, and other resources at:

https://www.fincen.gov/boi

If you have any further questions, contact Liskow attorney Marilyn C. Maloney.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney-client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

Privacy Policy: By subscribing to Liskow & Lewis’ E-Communications, you will receive articles and blogs with insight and analysis of legal issues that may impact your industry. Communications include firm news, insights, and events. To receive information from Liskow & Lewis, your information will be kept in a secured contact database. If at any time you would like to unsubscribe, please use the SafeUnsubscribe® link located at the bottom of every email that you receive.

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On Wednesday, September 27, the Treasury Department announced a new proposed rule extending the deadline for companies formed in 2024 to comply with the Corporate Transparency Act’s beneficial ownership and control reporting rules.  The original regulations required that new entities must file electronic reports with FinCEN within thirty days of formation.  The new rules propose giving new entities formed in 2024 ninety days to comply.  Entities created before January 1, 2024, continue to have a one-year deadline to comply with the new reporting rules.  All entities will also have thirty days to report updates when reported information changes.

For more information on this update, contact Liskow attorney Leon H. Rittenberg III.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney-client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

Privacy Policy: By subscribing to Liskow & Lewis’ E-Communications, you will receive articles and blogs with insight and analysis of legal issues that may impact your industry. Communications include firm news, insights, and events. To receive information from Liskow & Lewis, your information will be kept in a secured contact database. If at any time you would like to unsubscribe, please use the SafeUnsubscribe® link located at the bottom of every email that you receive.

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The Corporate Transparency Act requires most existing and most new businesses to file a detailed report with FINCEN (the United States Treasury’s Financial Crimes division) detailing who the major owners and managers are.  Currently, the filing period commences January 1, 2024.  New entities formed after that date currently have thirty days to file the report.  Entities in existence as of December 31, 2023 will have twelve months to file.  To assist in this process, FINCEN published a new small business guide today. You can find a link to this guide here.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney-client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

Privacy Policy: By subscribing to Liskow & Lewis’ E-Communications, you will receive articles and blogs with insight and analysis of legal issues that may impact your industry. Communications include firm news, insights, and events. To receive information from Liskow & Lewis, your information will be kept in a secured contact database. If at any time you would like to unsubscribe, please use the SafeUnsubscribe® link located at the bottom of every email that you receive.

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On February 16, 2024, the Treasury Department published a proposed regulation relating to new reporting requirements for certain transfers of residential real estate consistent with its rulemaking authority under the Bank Secrecy Act. The rule would require the filing of a Real Estate Report with the Financial Crimes Enforcement Network (FinCEN) after the transfer of residential real estate. Reportable transfers include any transfer, including many gratuitous transactions, of residential real property to an entity or trust not already subject to the Anti-Money Laundering and Countering the Financing of Terrorism regulatory regime. The Real Estate Report will need to be filed electronically on the FinCEN website no more than thirty (30) days after closing.

Residential Real Property

Residential real property includes: (1) any real property located in the United States with a structure designed to be occupied by one to four families, (2) vacant land in the United States zoned for a structure designed for one to four families, or (3) shares in a cooperative housing corporation in the United States. This applies even if there is a commercial component to the property, such as a residential unit located above a commercial enterprise. The proposed rule intends to include single-family homes, townhomes, condominiums, cooperatives, and small apartment buildings designed for four or fewer families. Property within the United States would include property within any of the fifty states, the District of Columbia, the Indian lands as defined in the Indian Gaming Regulatory Act, and any territory or possession of the United States. The broad geographic scope intends to discourage money laundering schemes in exempt territories.

Covered Transferees and Exemptions

The reporting requirements apply when the transferee is not an individual or an exempt entity or trust. For an individual, the real property must be titled in the owner’s name to be exempt from the reporting requirements. Certain entities may be exempt because they are already subject to sufficient data collection, such as securities reporting issuers, including companies that must register securities with the Securities and Exchange Commission. Other examples of exempt entities include depository institution holding companies, banks, credit unions, insurance companies, subsidiaries of exempt entities, broker/dealers in securities, and public utilities. Non-profit entities, however, will not be exempt from the reporting requirements.

Reportable Transfers

The proposed rule makes transfers reportable regardless of value or purchase price. Accordingly, gratuitous transfers like gifts and transfers to trusts would generally be included. The rule does make exceptions for certain low-risk transfers or transfers already subject to sufficient scrutiny. Financed transfers where the real property serves as security for the loan and the financial institution making the loan has an obligation to maintain an Anti-Money Laundering program and file Suspicious Activity Reports would be exempt from the filing requirements. Low-risk transfers resulting in the grant, transfer, or revocation of an easement also enjoy an exemption. Additionally, transfers resulting from death, divorce, or bankruptcy are exempt. Finally, transfers that do not involve a reporting person, discussed below, enjoy an exemption.

Cascading Tiers

The proposed rule creates a cascading tier of reporting persons who will be subject to the reporting requirements. In the first tier, real estate professionals providing certain settlement services in the settlement process must compile the necessary information and file the report. Specifically, the person listed as the closing or settlement agent on a settlement or closing statement usually will fall into this tier. If no one executes the specific settlement functions in the first tier, the second reporting tier falls to the person that underwrites an owner’s title insurance policy of the transferee. If there is no person underwriting a title insurance policy, the third reporting tier falls to the person that disburses the greatest amount of funds in connection with the transfer. If no person meets the first three criteria, the fourth reporting tier falls to the person that prepares an evaluation of the title status. Finally, when no person in the first four tiers participates in the transaction, the fifth reporting tier falls to the person who prepares the deed.

Beneficial Owners

The proposed Real Estate Report will collect information about the beneficial owners of the transferee entity or transferee trust. The definitions of beneficial ownership largely follow the definitions in the Corporate Transparency Act. Real Estate Reports must include information for any individual who, directly or indirectly, either exercises substantial control over the transferee entity or owns or controls at least twenty-five percent (25%) of the ownership interests of the transferee entity. Additionally, the Report must include information on beneficial owners of transferee trusts including anyone who is a trustee, otherwise has authority to dispose of trust assets, is a beneficiary who is the sole permissible recipient of income and principal with a right to demand distribution of substantially all of the assets of the trust, is a grantor or settlor of a revocable trust, or is the beneficial owner of a legal entity or trusts holding one of these positions. However, the rule would not require reporting of subsequent changes in the beneficial ownership of the transferee entity or trust.

For further questions regarding this topic, contact Liskow attorneys Kevin Naccari, Jr. and Leon Rittenberg, III.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney-client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

Privacy Policy: By subscribing to Liskow & Lewis’ E-Communications, you will receive articles and blogs with insight and analysis of legal issues that may impact your industry. Communications include firm news, insights, and events. To receive information from Liskow & Lewis, your information will be kept in a secured contact database. If at any time you would like to unsubscribe, please use the SafeUnsubscribe® link located at the bottom of every email that you receive.

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Since 2016, the Financial Crimes Network of the Treasury Department (“FinCEN”) has issued orders requiring title insurance companies to report certain non-financed residential real estate transactions to entities and trusts above a certain price threshold. These “Residential Real Estate Geographic Targeting Orders” or “GTOs” are limited to certain locations in the United States.  They have been expanded since 2016 and currently address certain metropolitan areas in California, Florida, Hawaii, Illinois, Massachusetts, Nevada, New York, Texas, and Washington.  The reason for the reporting requirements is the determination by FinCEN that cash transactions of residential real estate are a popular means of laundering illegal moneys. 

On Wednesday, FinCEN published notice of proposed rule making for a nationwide order that would require attorneys, title companies, brokers, and other real estate professionals (“Reporting Persons”) to report certain sales and donations to entities and trusts without regard to size of the purchase price.  Like the GTOs, this regulation would not address transactions that are financed by financial institutions that are required to have established anti-money laundering procedures and that are required to file suspicious activity reports.  However, loans by private lenders that are not subject to those regulatory requirements would not exempt the Reporting Person from the obligation to report transactions.

Notably, the proposed rule would require filing a “Real Estate Report” on a form that has not yet been published. It would require submission of beneficial ownership information for the legal entity or trust, not unlike the information required under the Corporate Transparency Act.  The rule would include a wide list of exceptions for transferee entities, including large, regulated entities.  Certain types of transfers, including those that result from the death of a property owner, a divorce, or a transfer to a bankruptcy estate, would also be excluded.  Notably not excluded are other types of common estate planning transfers, such as creation of family management trusts and transfers of real property to those trusts.

The proposed rules, as applied to the common estate planning transactions, will create a substantial burden on practitioners and their clients.

Links to the proposed rule, as well as explanatory details, are listed below.  Comments to the rule may be made for 60 days after the rule is published in the Federal Register.

News Release

Fact Sheet

Notice of Proposed Rulemaking

Contact Liskow attorneys Marilyn Maloney and Leon Rittenberg III for further questions regarding this topic and visit our Real Estate and Tax practice pages.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney-client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

Privacy Policy: By subscribing to Liskow & Lewis’ E-Communications, you will receive articles and blogs with insight and analysis of legal issues that may impact your industry. Communications include firm news, insights, and events. To receive information from Liskow & Lewis, your information will be kept in a secured contact database. If at any time you would like to unsubscribe, please use the SafeUnsubscribe® link located at the bottom of every email that you receive.