Final Call: Corporate Transparency Act Dec 31 Deadline Approaching

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Caitlin: Hello, everyone, and welcome to today's webinar, "Final Call: Corporate Transparency Act December 31 Deadline Approaching." My name is Caitlin Alaburda, and I will be your moderator.

Joining us today are two of CSC's experts, Alli Gerhart, Vice President of International Compliance and Governance, and Trent Bavaro, Director of Product Management for Corporate Transparency Services. And with that, I would like to welcome and pass things over to Alli and Trent.

Trent: Thank you, everyone, for joining us today. We are now less than 60 days away from the January 1st, 2025 deadline for all entities existing prior to 2024 to file their initial report. Now that same day, the newly formed entities will have a reduction in the number of days they have to file this report, from 90 days currently down to just 30 days. And all entities have 30 days to file updated reports to information previously reported and on record with FinCEN.

Today we're going to talk about how to identify if you were one of the tens of millions of reporting companies that needs to file a beneficial ownership information report with FinCEN and talk about the 23 exemptions with a deeper dive into 3 of them. We'll also talk about company applicants, which is an individual that needs to be listed on any newly formed entity beneficial ownership information report. There is an exception that that does not need to be included for existing entities. We are looking for individuals that were involved in the actual formation filing itself.

Also going to identify beneficial owners, whether through substantial control or through the 25% ownership or control of ownership interest of the reporting company, and talk about the contents of the report, whether the use of personally identity information, which is the same information needed whether you are a beneficial owner or a company applicant, or the use of a FinCEN ID, the timing that you have to file and to be compliant, and potential penalties for willful non-compliance with the Corporate Transparency Act.

We'll also dive into some of the newly issued FinCEN guidance since our last webinar in September. And we'll talk about pending litigation over the constitutionality of the Corporate Transparency Act and why it's unlikely to grant reprieve over your filing obligation.

We're also here to help provide guidance and comfort in making the right decisions for your company and meeting filing deadlines. And if you have any questions during the presentation, feel free to send those in the widget and we'll do our best to answer them in real time. And if there's time remaining at the conclusion of the webinar, we will also open up to Q&A. And with that, I'd like to hand it over to my colleague, Alli.

Alli: Thanks so much, Trent. Good afternoon, everyone. Thank you to all of you for joining us as well. As you know, the CTA obligates reporting companies to report certain information about their company applicants and beneficial owners. For anyone joining us who is not yet familiar with those terms, no worries. We're going to talk about the meaning of each of them. And as we've done in our previous webinars, within each of those sections I'll talk about recent guidance published by FinCEN pertaining to each topic.

But in general, a reporting company is a domestic corporation, LLC, or similar entity, or a foreign company registered to do business in the U.S. unless an exemption applies. A company applicant is the filing party. The term refers to the person who files the company formation document with the registry, and if different, the person that directed the filing. Beneficial owners are the company's ultimate owners and significant controllers.

The term "reporting company" means a corporation, limited liability company, or similar entity that is either created by the filing of a document with the secretary of state or similar office, or formed under the law of a foreign country and registered to do business in the U.S. by filing a document with the secretary of state or similar office. The term "similar entity" is slightly ambiguous, but it's generally understood to refer to any company or entity at all that was created by the filing of a document with the secretary of state or similar office.

Here, though, we do have some recent guidance to share. In October, FinCEN clarified that a reporting company that is registered to do business in multiple states does not need to file a BOI report each time it registers in a new state. So I saw we had a question in the chat about that. The BOI reporting company for domestic companies is triggered upon creation, but for foreign companies it's triggered at the first registration to do business in the U.S. Any subsequent business registrations do not trigger additional BOI filing requirements.

Also, in October, FinCEN provided additional guidance on the meaning of the term "similar office." A similar office is any office, including a department, agency, or bureau of a government authority under the law of a state or Indian tribe, where or through which a domestic entity files a document to be created, or a foreign company files a document to be registered to do business in the United States. Federal agencies are not similar offices. Domestic entities that are created by state or federal charter are not created by the filing of a document with a secretary of state or similar office.

But even if an entity meets the definition of a reporting company, you must then consider whether it meets any of the 23 exemptions. If an exemption applies, the entity is not a reporting company and does not need to file a BOI report with FinCEN. The vast majority of the exemptions apply to regulated companies, such as financial institutions, SEC-regulated companies, public utilities, and insurance companies. These exemptions are specified by reference to definitions contained in particular laws.

However, there are three exemptions that are more broadly applicable, and these are the ones that most frequently affect our audience. Those three are the large company exemption, the subsidiary of exempt entity exemption, and inactive entity exemption. We'll look at these in more detail and consider some of the scenarios.

Large operating company exemption. So for private, large unregulated corporates, this exemption is absolutely key. There are three elements to this exemption, all of which must be satisfied for the exemption to apply.

First, the company must have more than 20 employees. These employees must also be employed in the United States and must be employed by the entity itself, not aggregated across a corporate group. This lack of aggregation was a big surprise. Companies that you might normally think of as large enterprises may not meet this exemption if their employees are spread out across different subsidiaries or otherwise not employed at the parent company level.

Second, the company must have at least $5 million in gross receipts or sales from U.S. income. That amount must be reported on the company's federal income tax or information return for the previous year, excluding amounts from sources outside the U.S. Helpfully, where the company is part of a consolidated group, it is sufficient for the $5 million threshold to be met by the group collectively rather than the entity individually.

Third, the company must have an operating presence at a physical office within the U.S. This has been defined to mean a physical location where the entity regularly conducts its business. The location must be owned or leased by the entity, and it must be physically distinct from the place of business of any other unaffiliated entities. In October, FinCEN addressed whether a personal residence could qualify as a physical office within the U.S. FinCEN replied that nothing in the definition precludes a residence from satisfying this element. However, the entity still has to meet the other conditions. The entity that qualifies for the exemption must itself own or lease the location and regularly conduct business at that location, and the location must be physically distinct from the place of business of other unaffiliated entities.

FinCEN acknowledges that it's possible for companies to fluctuate above or below either the employee or gross receipts or sales thresholds. When that occurs, the reporting company is expected to file an updated BOI report, which is due within 30 days of the occurrence of the change.

Subsidiaries of exempt entities. This is another critical exemption for larger corporate structures. The exemption applies to an entity whose ownership interests are controlled or wholly owned, directly or indirectly, by certain types of exempt entities. This is a fairly simple rule to apply. No multi-element test. But there are two key things to be aware of.

First, notice the emphasis on wholly owned entities. Entities only partially owned by an exempt entity or parent companies of an exempt entity do not qualify for this exemption. This was a deliberate decision by FinCEN, and in their view to expand the definition to these types of entities would have been creating a new exemption and they declined to do that.

Second, the exemption does not apply to subsidiaries of all exempt entities. The vast majority of exemptions do qualify for the subsidiary exemption, but there are four that do not, and those are listed here. The thing to know is that if your parent company is relying on one of these exemptions, it's wholly owned subsidiaries cannot utilize the subsidiary exemption. In that case, the subsidiary will be a reporting company unless some other exemption applies.

Last and least, the inactive company exemption. I call this one the exemption of last resort. It has six elements, all of which must be satisfied for the exemption to apply. I find several of these elements to be a bit ambiguous, and a change in circumstance could quickly disqualify an entity, thereby requiring an updated BOI report. The six elements are listed here.

The entity must have been in existence on or before January 1st, 2020. That one is pretty clear.

But the second element, the entity was not engaged in active business is a little more ambiguous. Some commenters question whether winding up activities could be considered active business, but FinCEN declined to create any specific rules, reasoning that there was too much variability in state practices and more specific examples leave too much confusion.

The third element, no foreign ownership should also be fairly simple to apply. The rule covers both direct or indirect and whole or partial ownership.

The fourth element, no change in ownership in the preceding 12 months was also flagged by some commenters to be somewhat ambiguous. Does a change in ownership apply to direct or indirect, whole or partial ownership, like the previous element? In the commentary to the final rule, FinCEN states with respect to the meaning of any change in ownership, FinCEN believes that the proposed regulation is sufficiently clear. It would cover any and all changes in an entity's ownership.

The fifth element requires that the entity has not sent or received any funds in any amount greater than $1,000, either directly or through any financial account in which the entity or any affiliate has an interest in the preceding 12-month period.

The sixth element requires that the entity not otherwise hold any kind or type of assets, including any ownership interest in any entity. Commenters urged FinCEN to clarify that the exemption would apply even if an entity had a bank account or owned certain incidental assets, such as IP rights or website domains. But here again, FinCEN declined.

So putting these three examples together, here is a really, really simple one. Large Company is exempt under the large company exemption. It has direct and indirect wholly owned subsidiaries who are all exempt under the subsidiary of exempt company exemption. No need to rely on any other exemption.

Switching the example however, here we have a JV Partner with a 20% interest in JV sub A. LC sub 1 and its subsidiaries, LC sub 2 and LC sub 3, are still wholly owned by Large Company, so they can rely on the subsidiary exemption. However, JV sub A and JV sub B are only partially owned by Large Company. They will need to inquire about the status of JV Partner unless they independently qualify for some other exemption. We know that because JV sub A owns 100% of JV sub B, JV sub A will not qualify for the inactive company exemption.

Now when I've discussed this scenario previously, I tend to get questions from people that want to know what would happen assuming different sets of facts. Unfortunately, it's impossible to address all of the potential variations in a forum like this. But let me address two common ones.

If we assume that JV Partner is also an exempt entity, then JV sub A and JV sub B are still wholly owned by exempt entities. They may still qualify for the subsidiary exemption, even if Large Company and JV Partner are unaffiliated and if they are exempt for different reasons. The key is that every owner is an exempt entity, so the exemption applies.

Another scenario assumes that JV Partner is not exempt. Could JV sub A and JV sub B still qualify for the subsidiary exemption on the basis that they are controlled, even though they are not wholly owned by an exempt entity? Here I think is where you need to be really, really careful. It's true that the standard of wholly owned or controlled are disjunctive elements. But notice the inferential step. This conclusion assumes something about the nature of JV Partner's participation as well as the meaning of the word "control" that's not been clearly defined.

Must an entity be wholly controlled, much like it must be wholly owned for the exemption to apply? Here at least the answer appears to be yes. In October, FinCEN issued additional guidance stating in this context, control of ownership interests means that the exempt entity or entities entirely control all of the ownership interests in the reporting company in the same way the exempt entity or entities must wholly own all of a subsidiary's ownership interest for the exemption to apply.

As we'll discuss short shortly, the definition of ownership interests is very broad. You would need to take a very close look at the types of ownership interest in JV sub A and determine if JV Partner has any control over any of them.

Final example, here we have a wholly owned corporate structure, but the entity qualifying for the large company exemption is not the ultimate parent. This can easily happen when, like here, the main operating company, Large Company is held by a holding company with no employees of its own. Perhaps the enterprise also has a few subsidiaries owned by the holding company rather than Large Company.

The key thing to understand in this example is that neither the large company exemption, the subsidiary exemption, or the inactive company exemption will apply to HoldCo. Assuming HoldCo is a corporation or other entity created by a filing with the secretary of state and no other exemption applies to HoldCo, HoldCo is a reporting company.

Further assuming the same facts about HC sub A and HC sub B, these entities will also be reporting companies. They cannot rely on the subsidiary exemption since they are not in the direct chain of ownership of Large Company.

So once you determine that you have a reporting company, the next key concept is the company applicant. But before you do much analysis, consider whether your reporting company must report a company applicant. For this question, the key date is January 1st, 2024, the day the CTA came into effect.

For domestic reporting companies created before 01/01/24 and foreign companies registered to do business in the U.S. before 01/01/24, you do not need to report a company applicant. This is extremely helpful, and it was a deliberate policy decision. For companies that have been in existence for a very long time, it may not be possible to determine who the company applicant was way back when. But for reporting companies created on or after 01/01/24, you had notice of this requirement and the opportunity to collect the appropriate information, so the company applicant information will be required.

For companies created or registered on or after 01/01/24, there must be at least one but no more than two company applicants. The company applicants must be individuals, not legal entities or organizations. There are two types of company applicants. The first is the individual who directly files the document that creates or registers the company, and second, if more than one person is involved in the filing, the individual who is primarily responsible for directing or controlling the filing.

We'll talk more about updates to BOI report shortly. But for now, it's helpful to know that once the company applicant information has been reported, there is no need to update this information if any of the company applicant's personal data later changes.

Most companies are created or registered through their registered agent, like CSC. For CSC's customers utilizing our filing services, a CSC employee will be one of your company applicants. We'll be able to provide the company with the employee's name and FinCEN identifier in order to complete any necessary BOI filing.

The question of who is primarily responsible for the filing can be a bit more ambiguous. It's easy to envision a scenario where more than two people are involved. So you have to make a bit of a judgment call about who is primarily responsible. Frankly though, we don't receive many questions about this topic anymore, and FinCEN has not issued any guidance on this topic in a long time. So I think that suggests that filers are relatively comfortable with this analysis.

However, determining a company's beneficial owners is by far the most complex part of the analysis. In many cases, the analysis can be quite simple. But in other more complex structures, the analysis can be extremely complex and ambiguous. Beneficial owners, though, are always individuals, and there are two types — individuals who directly or indirectly own or control at least 25% of the ownership interests of the reporting company, and individuals who exercise substantial control over the reporting company.

Every reporting company must report at least one beneficial owner, even if there is no individual who owns 25% of the ownership interests. FinCEN will expect that in that case every reporting company will have at least one person who is a substantial controller. A person who has substantial control may not even have any equity in the underlying reporting company. There's also no maximum number of possible beneficial owners.

So reporting companies are required to report all individuals who meet the ownership interest test and all individuals who exercise substantial control. So what is an ownership interest? Under the CTA, the ownership test is very broad, and it includes equity, stock, or voting rights, capital or profits interest, convertible instruments, options or other non-binding privileges to buy or sell any of the foregoing, or as a catchall, any other instrument, contract, or other mechanism used to establish ownership. A 25% or greater interest in any of these items makes an individual a beneficial owner under the ownership test.

So what does it mean to have substantial control? Again, the test is very broad and includes any individual meeting any of four general criteria: senior officer of the company, such as president, CEO, CFO, COO, general counsel, or other officer regardless of title who performs a similar function; someone who has authority to appoint or remove certain officers or a majority of directors; a person who directs, determines, or has substantial influence over important decisions; or as a catchall, has any other form of substantial control.

Given all of these different ways to become a beneficial owner, this definition could potentially include quite a lot of people. It is also possible that a company's senior officers do not actually own any of the shares of the company. They qualify as beneficial owners solely based on the control inherent to their job function. Depending on your management team and their level of knowledge about the CTA, this conclusion may require a bit of a delicate conversation.

To illustrate the analysis, FinCEN provides a few scenarios in its written guidance. But the most complex example is listed here for a reporting company that is a corporation with multiple indirect owners through Company Y and Company Z. In this example, Individuals A, B, C, and F are all beneficial owners. Individual A is the CFO, Individual C is the CEO and president, and Individual F does not have an official title, but we're told he does direct important decisions. These individuals all meet the substantial control test.

Individual B owns 70% of Company Y's 50% interest in the reporting company. Individual B's indirect ownership interest can be calculated by multiplying 50% times 70%, for a total interest of 35%. Therefore, Individual B is also a beneficial owner because his indirect interest in the reporting company exceeds 25%.

Individuals D and E only own 25% of Company Z's 50%, for a total interest of only 12.5% each. Absent any other facts indicating any other form of ownership or control, we can conclude that Individuals D and E are not beneficial owners.

Although we have already determined that Individual A is a beneficial owner under the control test, it's also worth noting that he is also a beneficial owner under the ownership test. He owns 30% of Company Y's 50%, which equals 15%, but he also owns 25% of Company Z's 50%, which equals 12.5%. Therefore, his total indirect ownership interest in the reporting company is 15% plus 12.5%, or 27.5%.

For purposes of filing a BOI report, it's not necessary to specify how exactly someone qualifies as a beneficial owner. I include that information here just to more fully explain the analysis.

So the prior example was the most complex example in FinCEN's guidance. But one of the major points of difficulty we've seen is how to apply the beneficial owner analysis when a trust directly or indirectly holds shares in a reporting company. This is probably the biggest gap in FinCEN's guidance and the public's understanding. We've been urging FinCEN to offer more comprehensive guidance tailored to various different types of trusts and their uses. But for now, this is what we know.

Beneficial owners can own or control a reporting company through trusts, either by exercising substantial control over a reporting company through a trust arrangement, or by owning or controlling the ownership interests of a reporting company that are held in a trust. In April, FinCEN did attempt to provide some clarity, but noted that the particular facts and circumstances determine whether specific trustees, beneficiaries, guarantors, settlors, and other individuals with roles in the particular trust are beneficial owners.

The following conditions indicate that an individual owns or controls ownership interest through a trust: a trustee or other individual that has the authority to dispose of trust assets; a beneficiary that is the sole permissible recipient of income and principal from the trust or has the right to demand a distribution of or withdraw substantially all of the assets from the trust; or a grantor or settlor who has the right to revoke the trust or otherwise withdraw assets from the trust. Note that this list may not be exhaustive of all of the conditions under which an individual owns or controls ownership interest through a trust. There may be other arrangements under which individuals associated with a trust may be considered a beneficial owner of the underlying reporting company.

FinCEN's April FAQs also included an important answer to reporting obligations in respective corporate trustees. By corporate trustee, we mean a legal entity, rather than an individual, that exercises the powers of a trustee. If ownership interests in the reporting company are owned or controlled by a trust with a corporate trustee, the reporting company should determine whether any of the corporate trustee's individual beneficial owners indirectly own or control at least 25% of the ownership interests of the reporting company through their ownership interests in the corporate trustee.

In other words, look through the corporate structure of the corporate trustee. It's worth noting that this may be really hard to do. A corporate trustee is likely a third party over which you have no information or even any right to information. If you are employed or engaged by the reporting company, you may be relying on counsel or management of the corporate trustee for this information.

Fortunately, the FAQ goes on to say that the reporting company may, but is not required to report the name of the corporate trustee in lieu of information about an individual beneficial owner only if all of the following three conditions are met. First, the corporate trustee is an exempt entity or rather is an entity that is exempt from the reporting requirements. The individual beneficial owner owns or controls at least 25% of ownership interest in the reporting company only by virtue of ownership interests in the corporate trustee, and the individual beneficial owner does not exercise substantial control over the reporting company.

Finally, in addition to considering whether the beneficial owners of a corporate trustee own or control the ownership interests of a reporting company whose ownership interests are held in trust, it may be necessary to consider whether any owners of or individuals employed or engaged by the corporate trustee exercise substantial control over a reporting company. The factors for determining substantial control by an individual connected with a corporate trustee are the same as for any other beneficial owner.

Report contents, timing, and penalties. So once you've determined that an entity is a reporting company and have determined its company applicants and beneficial owners, you'll need to file the appropriate information with FinCEN. There are five pieces of information required for each reporting company: the full legal name of the reporting company; all trade names, fictitious names, or DBAs regardless of whether the name is registered; street address of the company's principal place of business; jurisdiction of formation; and IRS taxpayer identification number.

If a reporting company does not have a principal place of business in the United States, use the following hierarchy of locations. First, if a reporting company does not have a principal place of business in the United States, then the company must report the primary location in the United States where it conducts business. Second, if a reporting company has no principal place of business in the United States and conducts business at more than one location within the U.S., then the reporting company may report as its primary location the address of any of those locations where the reporting company receives important correspondence.

Third, if a reporting company has no principal place of business in the United States and does not conduct business functions at any location in the United States, then and only then it should report the address in the United States of the person designated to accept service of legal process on its behalf. That's usually called your registered agent. Note that in October FinCEN updated its guidance on this point. If a reporting company uses its agent's address, FinCEN assumes that the agent has consented to the use of its address for this purpose and that the reporting company does not generally conduct business at any other location in the U.S.

For each beneficial owner and company applicant, the reporting company must file the full legal name of the individual, the date of birth for the individual, the residential street address, noting that the company applicant can report a business address under certain circumstances, a unique identifying number from certain government documents issued to the individual, and an image of the document containing the unique identifying number that also includes a photograph of that individual. Acceptable documents are non-expired passports, driver's licenses, and other state, local, or tribal identification documents.

According to guidance issued by FinCEN in October, the name on the identification document does not necessarily need to match the individual's current full legal name. The reporting company should still report the individual's current full legal name and a copy of their identity document. If the individual later obtains a new identity document that includes a changed name, address, or identifying number, you should update the information already provided by FinCEN, either by filing an updated BOI report or updating the previously filed FinCEN identifier information.

For privacy reasons some company applicants and beneficial owners may not wish to share their personal data with the reporting company. The CTA offers an alternative reporting option called the FinCEN identifier. The process to obtain a FinCEN identifier is very quick, and it can be done online. The individual will simply submit all of their own personal data to FinCEN and receive an identification number. The individual can then share that number with the reporting company in lieu of their personal data. The reporting company then submits the individual's name and FinCEN identifier, rather than the other fields. An entity may also obtain a FinCEN identifier when it submits a BOI report or any time thereafter.

But although the FinCEN identifier is helpful for protecting personal information, there are a couple of limitations and concerns you should be aware of. An individual or reporting company may only obtain one FinCEN identifier. This makes sense of course, but it's something someone could easily forget or lose the number.

But the biggest concern is that the issuance of a FinCEN identifier places the holder under a lifelong obligation to file an update within 30 days after any of the application information changes. Failure to do so is a reporting violation subject to civil and criminal penalties. This is concerning, but the obligation still exists even if the individual no longer has any interest in or relationship to the reporting company in the future .FinCEN has previously stated that they are aware of this burden and are looking at options, but so far there have been no further developments on this topic.

So your time to file a BOI report depends on when the domestic reporting company was first created, or when the foreign reporting company was first registered to do business in the U.S. As I'm sure everyone is aware, companies created or registered before 01/01/24 must file the BOI report by 01/01/25. Companies created or registered during the 2024 calendar year must file within 90 calendar days. And for companies formed or registered on or after 01/01/25, the reporting deadline shortens to 30 days of creation or registration.

BOI reports must be updated within 30 calendar days of any change to reported information with two notable exceptions. First, there is no requirement to report a company's termination or dissolution, and there is no requirement to file an updated report for any changes to personal information of a company applicant.

Additionally, if an inaccuracy is detected in a previously filed BOI report, the company must file a corrected report no later than 30 calendar days after the date the company becomes aware of the inaccuracy or had reason to know it.

Updates since September. So back in July, FinCEN advised on the requirements for dissolved or terminated entities. If a company ceased to exist before the CTA came into effect on January 1st, 2024, there is no filing obligation. However, if it continued to exist at any time in 2024, even if it terminated before the BOI report was due, the company is required to file a BOI report.

In October, FinCEN offered parallel guidance for foreign companies that cease to be registered in the U.S. As would be logical, the rule for foreign companies mirrors the rule for domestic companies. If a foreign company ceased to be registered to do business in the U.S. before the CTA came into effect on 01/01/24, there is no filing obligation. However, if it continued to be registered to do business in the U.S. for any period of time in 2024, even if it ceased before the BOI report was due, the company is required to file a BOI report.

Now when a company withdraws its registration to do business is a function of state law. A company that is administratively suspended from conducting business, for example because it failed to pay a filing fee or comply with certain jurisdictional requirements, that generally does not function as a cessation of business unless the suspension becomes permanent.

Another vexing question that we've been escalating to FinCEN has to do with entities that undergo a conversion, either by changing corporate form, jurisdiction, or both. FinCEN attempted to clarify the issue in October by saying that such a conversion "may" result in a new domestic reporting company. But the issue depends upon state or tribal law and the type of entity undergoing the conversion.

FinCEN was not able to give a bright-line rule that applied in all cases. And the answer makes a difference. If the conversion results in a new reporting company, the company must file an initial BOI report by the applicable deadline. If the conversion does not result in a new reporting company, the conversion may trigger an update to the company's existing BOI report. This might happen where, for example, the entity name changes from LLC to Inc., or a jurisdiction changes from one state to another.

In October, FinCEN offered some additional nuanced guidance applicable to the beneficial owner analysis. First, they reiterated that reporting companies should report beneficial owners as of the time of filing. They should not report individuals who may have been beneficial owners in the past. However, that left open a question about who are the beneficial owners of a company that has already ceased to exist. FinCEN clarified that if an entity ceases to exist before its initial BOI report is filed, then the BOI report should reflect the beneficial ownership information accurate as of the moment prior to the reporting company ceasing to exist.

Second, FinCEN addresses state community property laws. Typically, ownership interests belong only to the holder, and there is no obligation to aggregate interests with close family members. However, there is a potential nuance as it relates to ownership interests held by one spouse in a community property state. If applying community property law both spouses own or control at least 25% of the ownership interests of a reporting company, then both spouses should be reported to FinCEN as beneficial owners unless an exemption applies.

In October, FinCEN provided guidance about who can file a BOI report on behalf of a reporting company. Effectively this can be anyone that a reporting company authorizes to do so, such as an employee, owner, or third-party service provider. FinCEN further advises that if a reporting company will cease to exist before its BOI reporting deadline, it should make arrangements while it still exists to have the BOI report submitted on its behalf, even if the reporting company will cease to exist before the BOI report is filed.

Additionally, FinCEN advised on the responsibilities of the making of a BOI filing. First, the person making the filing must provide basic contact information for themselves, including name and email address. Second, he or she must certify on behalf of the reporting company that the information is true, correct, and complete.

And lastly, there has been quite a bit of litigation activity over the CTA. In our March webinar, we discussed the then very recent ruling from the Northern District of Alabama finding the CTA unconstitutional. The ruling enjoined FinCEN from enforcing the CTA against the plaintiffs in that case, but did not affect the obligations of other non-party companies. As anticipated, the case is currently on appeal to the 11th Circuit, and a hearing in the case was held in September. FinCEN has stated publicly that they will appeal to the U.S. Supreme Court if they do not prevail at the appellate level.

So with so many other challenges pending, there was a good chance that we would see a contrary ruling in a different circuit. That proved to be correct when the U.S. District Court for the District of Oregon issued their ruling in Firestone v. Yellen on September 20th. In this case, several individual plaintiffs sought a preliminary injunction against enforcement of the CTA on the basis that the CTA's beneficial ownership reporting requirement is unconstitutional. However, unlike the first case, the court in Firestone sided with the government. A similar case in the Eastern District of Virginia also denied the plaintiffs' request for preliminary injunction.

We can anticipate that different courts and different circuits will come to different conclusion on constitutionality, which will set us up for further appeals on the issue. At this point though, I find it highly improbable that we'll have a final judgment on constitutionality before the end of this year. We know that many companies have been watching these constitutional challenges and waiting to file BOI reports until we have a better sense of how these challenges will fare. But at this point, we now have less than two months to file for most of our historic entities. So at this point, we're advising please do not wait until the last minute to get these done.

And so with that, I will turn it back over to Trent.

Trent: Thank you. Thank you so much, Alli. I certainly learned a lot, and I hope everyone did as well. There's certainly a lot of information to digest and to remember for both initial reports and for updated reports. Again, this is something that is not necessarily an annual filing requirement, but you do need to file by the deadline. Existing entities have until the end of this year. Newly formed entities this year have 90 days. Starting next year, all newly formed entities have 30 days. And again, any updates, that is any time you have previously filed with FinCEN and that information changes, you need to file an update with FinCEN within 30 days of those changes.

And so it definitely is something where we can help you with understanding the guidance. If you like to have the ability to visualize the information needed for your filings, the ability to make sure that you file on time, we do offer an end-to- end support in connection with our CTA filing service. And it's not something where you need to be the registered agent to file on behalf of a reporting company. You just need that company's permission and authorization to do so. So it is something that we can assist with any number of entities, again whether or not you use our service. But we're able to do it in a way where we can help make you feel comfortable in understanding the guidance issued to FinCEN, how it applies to your situation, and then also making sure that we are able to gather the information needed in order to complete the reports.

So we do that securely because every single report needs to include beneficial ownership information. Company applicant information again is just for newly formed entities starting January 1st, 2024 and moving forward. But whether you're a company applicant or a beneficial owner, you still need to provide the same information to FinCEN, and that's your personal information, your name, your date of birth, your address, your government-issued ID number and an image of that ID, or a FinCEN ID number, If you applied for that to FinCEN directly and were issued that number, that can then be used in lieu of your personal information on each report.

But we can help to securely obtain that information. We can do it directly through you. Or if you would like us to kind of keep you out of the middle, we could reach out directly to those beneficial owners or company applicants, work with them directly to obtain their information securely, kind of keep you out of the middle. That goes into our system. We will do the review, and we will file each of those reports on your behalf directly with FinCEN. And we deliver the filed transcripts directly to your attention for your records.

And we could help with any number of reports. So the two most common are going to be your initial reports due for all entities that do not meet one of the exemptions, and then updated reports. And again, an updated report can potentially happen five years from now if there are no changes to what was previously on record with FinCEN. Or it could happen multiple times in a year if you're seeing lots of sort of change and turnover in terms of who are beneficial owners, either via substantial control or through the ownership analysis. So we could help with both of those.

We could help with corrected reports, meaning that if you filed something incorrectly and just sort filing a correction to what was on record with FinCEN, not that what was filed previously was accurate but actually was a mistake.

And then also a common question that came up during the Q&A, and I did my best to answer as many as I could is, "If I am an exempt entity, do I need to file?" The answer is no, you do not need to file if you are an exempt entity. There's no obligation to say I am exempt. However, if you previously filed a report and now you become exempt, you do need to file with FinCEN, letting them know that you are a newly exempt entity.

And those are all different forms and filings that we could assist with you. It either could be done directly through our CSC Global account using our web form, or through our intake spreadsheet sent to us for review and submission to FinCEN.

Now I wanted to make sure that it's remembered that every entity needs to file its own beneficial ownership information report if they do not meet one of the exemptions. What that means is there's no consolidated filings. So even if you have 10 entities and every single entity has the same beneficial owner or owners, every single company needs to file its own separate beneficial ownership information report with that information repeated over and over again.

So when there are situations where you have a high volume of reporting companies or you're forming a number of companies in the upcoming months, and again starting January 1st that time to find this report, it's going to be reduced down to 30 days, that can potentially put a lot of effort and sort of burden on you to make sure that you remain compliant. You can also see situations where a newly formed entity has changes soon after filing the updated report. Then you need to file within 30 days, but maybe it sort of hasn't settled yet and it changes the structure, or you're introducing new officers, you hired a new CEO. That essentially will dictate what you need to do in terms of updating your report.

And again, updates can be either through the beneficial owners previously listed, or the entity information itself. So again, every filing needs to include information on the entity in terms of it name, any DBA or trade names, its tax ID number, its U.S. address, jurisdiction of formation. But thinking about a DBA or doing business as name, if you recently formed a company, you may not file a trade name or DBA name until after 30 days. You file that, you now need to file an updated report with FinCEN.

So there are a lot of different triggering events for where you need to file updates, and that's something that we can assist with a very custom approach in terms of helping you make sure that you remain compliant with this obligation. Again, you have a complex project or a complex organizational structure, you may need to understand how a joint venture affects the reporting obligations. Or talking about the two instances where you may provide an entity as a beneficial owner instead of an individual. So normally we're talking about individuals as beneficial owners, but there are two very specific criteria where you can list an exempt entity as a beneficial owner of a reporting company, or you can list another entity that has previously filed its own report and has a FinCEN ID, again meeting certain criteria as well. So you want to make sure you feel comfortable and remain compliant, and that is something that we can do again for anyone that is interested in sort of an additional service and making sure, again, that you remain compliant this year and moving forward, as again this is something that continues into the future.

We also offer a system for tracking your entities, and this is a great product in terms of being able to see your whole portfolio. These are all my entities. These are the states we're registered in, the different filing numbers and dates. And it's something that can also be used for the CTA and identifying: Is this entity a reporting company? Does it meet one of the exemptions? Who are the officers and directors and beneficial owners?

And so a question that I'll get from time to time is, "Well, can I just use what I filed on my annual report? Is that the same information as my beneficial ownership report with FinCEN?" Oftentimes it's not because we're looking at different information here. And so you can't rely on what you use for an annual report because those individuals don't necessarily meet that ownership threshold and they don't necessarily meet the senior officer or substantial control threshold.

By way of an example, oftentimes annual reports list a secretary or treasurer, but typically that's not someone that's a senior officer and not someone with substantial control. So even though they're on your annual report, they would not be listed on your report with FinCEN. Annual reports typically don't list ownership, and they don't take into account indirect substantial control or indirect ownership as well. And those are considerations you'll need to have in place so that you can file this report correctly, and again you could be aware of any updates that may require additional updates for triggering events. Where what was previously filed with FinCEN is no longer accurate, you have 30 days to update and make sure everything is up to date within FinCEN's system.

Our product also has an org chart functionality to help run instantaneous calculations of indirect ownership percentages where you have a very complex structure, the entity is owned by multiple other entities that's owned by multiple other entities owned by multiple individuals, and sort of determining in aggregate do any individuals indirectly meet that ownership threshold. That is available within the system as well to kind of help you make those objective determinations as opposed to some of the subjective determinations in terms of who has substantial control.

But again, any type of information that's previously reported with FinCEN, when that changes you do need to file an update if that information is currently not on record with FinCEN. So again, that can be information about the entity itself or information about the beneficial owners. And something to kind of keep in mind is when you file an updated report, you need to include all the same information over again on that filing. So with an example, if a reporting company has five beneficial owners and we add a sixth beneficial owner and the previous five remain the same, when you file your updated report, you still need to list all the entity information again, all the five beneficial owners and their information again, and the sixth new beneficial owner. There's no shortcut in just adding that sixth person.

So it is something where it's really important to be able to identify your companies, who are the beneficial owners attached to it, what is their information, is there anything that's changing that's going to require you to file an updated report, and making sure that you do it within the appropriate deadline. And so being able to visualize and track your reporting company information, this is something that we can help offer to you and to help make sure that you remain compliant.