Three years ago, Congress created the Corporate Transparency Act (CTA). Ostensibly this was to prevent tax fraud, money laundering, terrorist financing and other illegal activities that are done through business entities to avoid detection. It required every business entity, LLC, S Corp, C Corp and partnership, to register and disclose information about “beneficial owners.” That’s why this report is called either a CTA report or BOI (beneficial owner information) report.
The reporting requirements went into effect in 2024.
The idea was it would help ferret out the bad guys who use business entities to hide their nefarious actions.
That was the idea, but small businesses weren’t happy about the requirement to report at least annually on “beneficial owners” of the entities. There have been multiple lawsuits filed against the Dept of Treasury regarding this requirement.
The most notable case to date was by the National Small Business Association (NSBA) against the CTA requirements. NSBA won.
In this ruling, the court found that the CTA exceeds the authority granted to Congress as it relates to Congress’s powers (1) over foreign affairs and national security (2) under the Constitution’s Commerce Clause, and (3) over taxes.
There is a pass, at least for now, for NSBA members as of 3/1/2024. All other entities or MSBA members who joined later still have to report. Entities that were formed prior to 1/1/2024 have until 12/31/2024 to report. A new entity formed in 2024 has to report within 90 days of formation. A new entity formed in 2025 or later has to report within 30 days of formation.
The Treasury has filed an appeal in Eleventh Circuit, hoping to appeal the decision. They have asked for an expedited review, due to the short time table.
If you’re not part of that original group, it really doesn’t impact you, though, on who wins the appeal.
There are 4 other cases pending a decision right now. Since these cases are heard at the state level, it’s very possible we’ll end up with a hodgepodge of decisions, depending on where you live.
Personally, I’m still waiting to file my older business entities.
Want more information on the CTA/BOI filings?
Corporate Transparency Act: Should you get a FinCen identifier?
Can you show a side by side comparison of 2 people: each a Real Estate Professional who want to increase their Tax Benefits by owning each others $900,000 ($750,000 loan) home & renting it each other? What is the Benefit and rents they should charge?
Hi Bruce:
That’s a great suggestion. I know you’re part of the Wednesday Coaching. I’m going to do that as part of one of the classes.
Just off the cuff, the biggest thing you give up with that strategy is the capital gains exclusion. If you sell a rental property that you haven’t lived in for 2 of the previous 5 years, you have capital gains tax. Otherwise, you can exclude up to $500K as married filing jointly. (Assuming no prior rental periods where we have to allocate gains)