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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 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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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 July 24, 2024, FinCEN updated its Corporate Transparency Act FAQ section to confirm that disregarded entities may use their parent’s Employer Identification Number when filing Beneficial Ownership Reports. “If the disregarded entity does not have an EIN, it is not required to obtain one to meet its BOI reporting requirements so long as it can instead provide another type of TIN[.]” FinCEN Beneficial Ownership Information Frequently Asked Questions F.13.

For further questions regarding the update, please contact Liskow attorneys Leon Rittenberg III and Kevin Naccari, Jr. and visit our Corporate Transparency Act Resource 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.

Privacy Policy: By subscribing to Liskow & Lewisʼ 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 Financial Crimes Enforcement Network (FinCEN) finalized a rule on August 28, 2024 that creates new reporting requirements for certain transfers of residential real estate. Under the new rule, transfers of residential real estate not already subject to the Anti-Money Laundering and Countering the Financing of Terrorism regulatory regime will be required to submit a Real Estate Report. The new regulations take effect on December 1, 2025. The Real Estate Report must be filed electronically with FinCEN by the final day of the month following the closing date, or thirty (30) days, whichever is longer. The person or entity required to report the transaction shall be determined based on a cascading tier of professionals involved in the transfer.

Residential real property encompasses: (1) any property in the United States with a structure intended for occupancy by one to four families; (2) vacant land in the U.S. designated for a structure meant for one to four families; or (3) shares in a cooperative housing corporation in the U.S. The proposed rule covers single-family homes, townhomes, condominiums, cooperatives, and small apartment buildings with up to four families.

The reporting requirements apply unless the transferee is an individual or an exempt entity or trust. For individuals, the property must be titled in the owner’s name to be exempt from reporting. Entities exempt from reporting include those already subject to significant data collection, such as securities issuers required to register with the SEC, depository institutions, banks, credit unions, insurance companies, subsidiaries of exempt entities, broker/dealers, and public utilities. Non-profit entities are not exempt from these requirements.

The proposed rule mandates reporting for all property transfers, regardless of value or price. This includes gratuitous transfers like gifts and transfers to trusts. However, transfers involving financed properties where the real estate secures a loan are exempt if the lending institution maintains an Anti-Money Laundering program and files Suspicious Activity Reports. Also exempt are low-risk transfers related to easements, as well as those resulting from death, divorce, or bankruptcy.

The final rule did add an additional exemption for certain estate planning transfers. Transfers of residential real property to a trust will not be reportable if: (1) the transfer is for no consideration; (2) the transferor of the property is an individual (either alone or with the individual’s spouse); and (3) the settlor or grantor of the trust is that same transferor individual, that individual’s spouse, or both of them. But FinCEN rejected comments suggesting that transfers to legal entities, such as a contribution to capital made by a partner or member, should be exempt. “FinCEN intended to scope this exception in a manner that was responsive to comments but that would not create an overly broad exception that would be open to significant abuse.”

The rule establishes a tiered system for reporting obligations. In the first tier, real estate professionals who provide settlement services must compile and file the report, typically the person listed as the closing or settlement agent. If no such agent is involved, the second tier falls to the entity underwriting the owner’s title insurance policy. If no title insurance is underwritten, the third tier goes to the person disbursing the largest amount of funds related to the transfer. If none of the first three tiers are applicable, the fourth tier is assigned to the person preparing a title evaluation. Lastly, if none of the previous tiers apply, the fifth tier applies to the person preparing the deed.

The Real Estate Report will gather information about the beneficial owners of the transferee entity or trust, based on definitions from the Corporate Transparency Act. The report must include details of any individual who, directly or indirectly, has substantial control over the transferee entity or owns at least 25% of its ownership interests. For trusts, it must identify trustees, those with authority to manage trust assets, beneficiaries with exclusive rights to income and principal, grantors or settlors of revocable trusts, and beneficial owners of entities holding these positions. However, the rule does not require reporting of changes in beneficial ownership after the initial report.

The final rule adopts a reasonable reliance standard that allows reporting persons to reasonably rely on information provided by other persons. But the reasonable reliance standard only applies to information provided by the transferee or the transferee’s representative when the person providing the information certifies the accuracy of the information in writing when the reporting person is reporting beneficial ownership information of transferee entities or transferee trusts. Although commenters argued that the standard was too vague and that reporting persons should be able to submit incomplete reports when a party to the transfer declines to provide such information, FinCEN rejected these comments because the “reasonable reliance standard is consistent with that used by certain financial institutions subject to customer due diligence requirements[,]” and that “allowing for the submission of incomplete reports could make it easier for transferees to avoid reporting requirements while also making it difficult for FinCEN to ensure compliance with the rule.”

For further questions regarding the rule, please contact Liskow attorneys Leon Rittenberg III and Kevin Naccari, Jr. and visit our Real Estate practice 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.

Privacy Policy: By subscribing to Liskow & Lewisʼ 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.