As you may know, we have posted numerous updates on the pending litigation surrounding the Federal Corporate Transparency Act (“CTA”) and enforcement of the CTA by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”).

On February 18, 2025, the U.S. District Court for the Eastern District of Texas issued an order lifting the nationwide preliminary injunction of the CTA in Samantha Smith et al. v. United States Department of the Treasury et al. (EDTX 6:24-cv-336). As a result, as of February 19, 2025, the CTA reporting requirements and deadlines are reinstated, on a nationwide basis.

On February 19, 2025, FinCEN issued an alert on its website updating the beneficial ownership information (BOI) reporting requirements, as outlined below:

 Initial Report
Reporting Companies existing on or before December 21, 2024  Must file by March 21, 2025
Reporting Companies created or registered in the United States on or after December 22, 2024 and before January 1, 2025  Must file within 90 calendar days after the earlier of when: (a) the Reporting Company had actual notice its creation or registration in the US was effective, or (b) the public had notice through a publicly accessible registry that such Reporting Company had been created or registered to do business in the US.
Reporting Companies created or registered in the United States on or after January 1, 2025 and before February 20, 2025  Must file by March 21, 2025
Reporting Companies created or registered in the United States on or after February 20, 2025Must file within 30 calendar days after the earlier of when: (a) the Reporting Company had actual notice its creation or registration in the US was effective, or (b) the public had notice through a publicly accessible registry that such Reporting Company had been created or registered to do business in the US.

Additionally, a reporting company must file a report of any updates, changes or corrections to its BOI report by the later of (a) March 21, 2025 or (b) 30 calendar days after the date that (x) a change in beneficial ownership occurs or (y) the reporting company becomes aware or has reason to know of an inaccuracy in its report.

FinCEN also announced its intention to revise the BOI reporting rule to reduce the burden for lower-risk entities, such as many U.S. small businesses.

We will provide further updates on these federal cases and any updates from FinCEN when available.

Furthermore, these federal litigation cases do not affect any similar state corporate transparency laws. New York’s LLC Transparency Act (the “NY Act”) requires the disclosure of beneficial ownership information to the New York Department of State by limited liability companies formed under the laws of the state of New York and foreign limited liability companies authorized to do business in the state of New York. The NY Act is largely based on the CTA and currently is set to go into effect on January 1, 2026.

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For further information or guidance on revising your policies, procedures, and corporate governance agreements, please contact David Paseltiner or Rose Egan. You can follow our blog for more information as it becomes available.

As you may know, we have posted numerous updates on the pending litigation surrounding the Federal Corporate Transparency Act (“CTA”) and enforcement of the CTA by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”).

On February 5, 2025, the Department of Justice on behalf of the Department of the Treasury filed an appeal of a federal district court’s January 7th decision granting a nationwide preliminary injunction of the CTA in Samantha Smith et al. v. United States Department of the Treasury et al. (EDTX 6:24-cv-336). Additionally, the Department of Justice filed a motion with the federal district court to stay the January 7th decision, while the appeal is pending to the Fifth Circuit.

In its motion for a stay, Defendant cited the recent United States Supreme Court decision to lift another federal district court’s nationwide preliminary injunction in Texas Top Cop Shop, Inc. et al. v. Merrick Garland, Attorney General of the United States, et al. (EDTX 4:24-cv-478). Furthermore, the motion clarified that if the nationwide preliminary injunction is lifted, then FinCEN will extend the BOI report filing deadline for 30 days and “assess whether it is appropriate to modify the CTA’s reporting requirements to alleviate the burden on low-risk entities while prioritizing enforcement to address the most significant risks to U.S. national security.”

As of February 10, 2025, FinCEN has issued an alert on its website stating that it will be accepting voluntary submissions while the nationwide preliminary injunction is in effect.

Ultimately, the constitutionality of the CTA will be decided. We will provide further updates on these cases when available.

These federal litigation cases do not affect any similar state corporate transparency laws. New York’s LLC Transparency Act (the “NY Act”) requires the disclosure of beneficial ownership information to the New York Department of State by limited liability companies formed under the laws of the state of New York and foreign limited liability companies authorized to do business in the state of New York. The NY Act is largely based on the CTA and currently is set to go into effect on January 1, 2026.

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For further information or guidance on revising your policies, procedures, and corporate governance agreements, please contact David Paseltiner or Rose Egan. You can follow our blog for more information as it becomes available.

As you may know, we have posted numerous updates on the pending litigation surrounding the Federal Corporate Transparency Act (“CTA”) and enforcement of the CTA by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”).

After considerable back and forth in the last several weeks on whether the CTA Beneficial Owner Information filing deadlines should be stayed pending a federal district court’s decision on the constitutionality of the CTA, the United States Supreme Court has decided to lift the federal district court’s nationwide preliminary injunction in Texas Top Cop Shop, Inc. et al. v. Merrick Garland, Attorney General of the United States, et al. (EDTX 4:24-cv-478). However, a separate division of the Eastern District of Texas granted another nationwide preliminary injunction in Samantha Smith et al. v. United States Department of the Treasury et al. (EDTX 6:24-cv-336).

The confusion continues. Given that the Supreme Court’s decision was issued in Texas Top Cop Shop on January 23rd, after the lower federal court’s January 7th decision in Smith, the Smith court may amend its order to conform with the Supreme Court’s decision in Texas Top Cop Shop.Additionally, with the new administration settling in, there is uncertainly whether the U.S. Attorney General’s Office will pursue defending the CTA any further.

As of January 24, 2025, FinCEN has issued an alert on its website stating that it will be accepting voluntary submissions while the nationwide preliminary injunction is in effect.

Ultimately, the constitutionality of the CTA will be decided. We will provide further updates on these cases when available.

These federal litigation cases do not affect any similar state corporate transparency laws. New York’s LLC Transparency Act (the “NY Act”) requires the disclosure of beneficial ownership information to the New York Department of State by limited liability companies formed under the laws of the state of New York and foreign limited liability companies authorized to do business in the state of New York. The NY Act is largely based on the CTA and currently is set to go into effect on January 1, 2026.

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For further information or guidance on revising your policies, procedures, and corporate governance agreements, please contact David Paseltiner or Rose Egan. You can follow our blog for more information as it becomes available.

As you may know, we posted an update on the pending litigation surrounding the Federal Corporate Transparency Act (“CTA”) and enforcement of the CTA by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). On December 3, 2024, a nationwide preliminary injunction was issued by the Federal District Court for the Eastern District of Texas (Texas Top Cop Shop, Inc. et al. v. Merrick Garland, Attorney General of the United States, et al. (EDTX 4:24-cv-478)). The defendants’ filed an appeal and motion seeking to lift the preliminary injunction.

On December 23, 2024, the United States Court of Appeals for the Fifth Circuit (Case No. 24-40792) issued an Order granting Appellants’ motion for a stay of the Federal District Court’s nationwide preliminary injunction, which lifted the preliminary injunction. However, on December 26, 2024, a different panel of the U.S. Court of Appeals for the Fifth Circuit issued an order vacating the Court’s December 23, 2024 order granting a stay of the preliminary injunction. Accordingly, as of December 26, 2024, the injunction issued by the district court in Texas Top Cop Shop, Inc. v. Garland  is in effect and reporting companies are not currently required to file beneficial ownership information with FinCEN. FinCEN has issued an alert, on its website, stating that it will be accepting voluntary submissions only, while the nationwide preliminary injunction is in effect.

The Fifth Circuit has ordered that the appeal will be expedited to the next available oral argument panel. However, the Fifth Circuit’s decision does not decide on the constitutionality of the CTA, which is still pending before the District Court for the Eastern District of Texas. We will provide further updates on these cases when available.

The federal litigation cases do not affect any similar state corporate transparency laws. New York’s LLC Transparency Act (the “NY Act”) requires the disclosure of beneficial ownership information to the New York Department of State by limited liability companies formed under the laws of the state of New York and foreign limited liability companies authorized to do business in the state of New York. The NY Act is largely based on the CTA and currently is set to go into effect on January 1, 2026.

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For further information or guidance on revising your policies, procedures, and corporate governance agreements, please contact David Paseltiner or Rose Egan. You can follow our blog for more information as it becomes available.

As you may know, we posted an update on the pending litigation surrounding the Federal Corporate Transparency Act (“CTA”) and enforcement of the CTA by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). On December 23, 2024, the United States Court of Appeals for the Fifth Circuit (Case No. 24-40792) issued an Order granting Appellants’ motion for a stay of the Federal District Court’s nationwide preliminary injunction, which means that the preliminary injunction of the CTA has been lifted. As a result, the CTA reporting requirements and deadlines are reinstated, on a nationwide basis. FinCEN has announced updated initial BOI report filing deadlines as discussed in our article.

On December 23, 2024, the United States Court of Appeals for the Fifth Circuit (Case No. 24-40792) issued an Order granting Appellants’ motion for a stay of the Federal District Court’s nationwide preliminary injunction, which means that the preliminary injunction of the CTA has been lifted. As a result, the CTA reporting requirements and deadlines are reinstated, on a nationwide basis. FinCEN has announced updated initial BOI report filing deadlines, on its website, as outlined below:

 Initial Report
Reporting Companies existing before January 1, 2024  Must file by January 13, 2025
Reporting Companies created or registered in the United States on or after September 4, 2024 that had a filing deadline between December 3, 2024 and December 23, 2024  Must file by January 13, 2025
Reporting Companies created or registered in the United States on or after December 3, 2024 and on or before December 23, 2024  Have an additional 21 days from their original filing deadline to file. The original filing deadline is within 90 calendar days after the earlier of when: (a) the Reporting Company had actual notice its creation or registration in the US was effective or (b) the public had notice through a publicly accessible registry that such Reporting Company had been created or registered to do business in the US.
Reporting Companies formed on or after December 24, 2024 and before January 1, 2025DomesticMust file within 90 calendar days after the earlier of when: (a) it has actual notice that its creation is effective, or (b) the public has notice through a publicly accessible registry that the domestic reporting company has been created
ForeignMust file within 90 calendar days after the earlier of when: (a) it has actual notice that its registration in the US is effective, or (b) the public has notice through a publicly accessible registry that the foreign reporting company has been registered to do business
Reporting Companies formed on or after January 1, 2025DomesticMust file within 30 calendar days after the earlier of when: (a) it has actual notice that its creation is effective, or (b) the public has notice through a publicly accessible registry that the domestic reporting company has been created
ForeignMust file within 30 calendar days after the earlier of when: (a) it has actual notice that its registration in the US is effective, or (b) the public has notice through a publicly accessible registry that the foreign reporting company has been registered to do business

Additionally, a reporting company must file a report within 30 calendar days after the date that (x) a change in beneficial ownership occurs or (y) the reporting company becomes aware or has reason to know of an inaccuracy in its report.

The Fifth Circuit has ordered that the appeal will be expedited to the next available oral argument panel. However, the Fifth Circuit’s decision does not decide on the constitutionality of the CTA, which is still before the District Court for the Eastern District of Texas. We will provide further updates on these cases when available.

The federal litigation cases do not affect any similar state corporate transparency laws. New York’s LLC Transparency Act (the “NY Act”) requires the disclosure of beneficial ownership information to the New York Department of State by limited liability companies formed under the laws of the state of New York and foreign limited liability companies authorized to do business in the state of New York. The NY Act is largely based on the CTA and currently is set to go into effect on January 1, 2026.

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For further information or guidance on revising your policies, procedures, and corporate governance agreements, please contact David Paseltiner or Rose Egan. You can follow our blog for more information as it becomes available.

As you may know, we posted an update on the pending litigation surrounding the Federal Corporate Transparency Act (“CTA”) and enforcement of the CTA by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). On December 3, 2024, a nationwide preliminary injunction was issued by the Federal District Court for the Eastern District of Texas (Texas Top Cop Shop, Inc. et al. v. Merrick Garland, Attorney General of the United States, et al. (EDTX 4:24-cv-478)). However, the defendants’ filed an appeal and motion seeking to lift the preliminary injunction.

On December 23, 2024, the United States Court of Appeals for the Fifth Circuit (Case No. 24-40792) issued an Order granting Appellants’ motion for a stay of the Federal District Court’s nationwide preliminary injunction, which means that the preliminary injunction of the CTA has been lifted. As a result, the CTA reporting requirements and deadlines are reinstated, on a nationwide basis, as outlined below:

 Initial Report
Entities existing before January 1, 2024  Must file by January 1, 2025
New entities formed on or after January 1, 2024 and before January 1, 2025DomesticMust file within 90 calendar days after the earlier of when: (a) it has actual notice that its creation is effective, or (b) the public has notice through a publicly accessible registry that the domestic reporting company has been created
ForeignMust file within 90 calendar days after the earlier of when: (a) it has actual notice that its registration in the US is effective, or (b) the public has notice through a publicly accessible registry that the foreign reporting company has been registered to do business
New entities formed on or after January 1, 2025DomesticMust file within 30 calendar days after the earlier of when: (a) it has actual notice that its creation is effective, or (b) the public has notice through a publicly accessible registry that the domestic reporting company has been created
ForeignMust file within 30 calendar days after the earlier of when: (a) it has actual notice that its registration in the US is effective, or (b) the public has notice through a publicly accessible registry that the foreign reporting company has been registered to do business

Additionally, a reporting company must file a report within 30 calendar days after the date that (x) a change in beneficial ownership occurs or (y) the reporting company becomes aware or has reason to know of an inaccuracy in its report.

The Fifth Circuit has ordered that the appeal will be expedited to the next available oral argument panel. However, the Fifth Circuit’s decision does not decide on the constitutionality of the CTA, which is still before the District Court for the Eastern District of Texas. We will provide further updates on these cases when available.

The federal litigation cases do not affect any similar state corporate transparency laws. New York’s LLC Transparency Act (the “NY Act”) requires the disclosure of beneficial ownership information to the New York Department of State by limited liability companies formed under the laws of the state of New York and foreign limited liability companies authorized to do business in the state of New York. The NY Act is largely based on the CTA and currently is set to go into effect on January 1, 2026.

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For further information or guidance on revising your policies, procedures, and corporate governance agreements, please contact David Paseltiner or Rose Egan. You can follow our blog for more information as it becomes available.

On December 3, 2024, the United States District Court for the Eastern District of Texas issued a Memorandum Opinion and Order granting Plaintiffs’ motion for a preliminary injunction, on a nationwide basis, of the Federal Corporate Transparency Act (“CTA”) and enforcement of the CTA by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) (Texas Top Cop Shop, Inc. et al. v. Merrick Garland, Attorney General of the United States, et al. (4:24-cv-478)). Although the Court concluded that “[t]he CTA is likely unconstitutional as outside of Congress’s power,” the current decision only enjoins the CTA pending further decision from the Court. As a result, the CTA reporting requirements and deadlines are stayed unless and until further decision from the Court.

While the CTA is currently enjoined on a nationwide basis, the District Court’s decision does not affect any similar state corporate transparency laws. New York’s LLC Transparency Act (the “NY Act”) requires the disclosure of beneficial ownership information to the New York Department of State by limited liability companies formed under the laws of the state of New York and foreign limited liability companies authorized to do business in the state of New York. The NY Act is largely based on the CTA and currently is set to go into effect on January 1, 2026.

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For further information or guidance on revising your policies, procedures, and corporate governance agreements, please contact David Paseltiner or Rose Egan. You can follow our blog for more information as it becomes available.

New York State recently adopted a new law known as the Freelance Isn’t Free Act (the “NYS Act”), as Article 44-A of the General Business Law. The NYS Act follows in the footsteps of a New York City law by the same name. Both laws address independent contractor arrangements and offer protections to certain independent contractors or freelance workers, as defined in the NYS Act and the New York City law. However, the two laws vary in some aspects. Below is a description of the NYS Act’s requirements and provisions.

Who is a freelance worker under the NYS Act?

A “freelance worker” is defined as “any natural person or organization composed of no more than one natural person, whether or not incorporated or employing a trade name, that is hired or retained as an independent contractor by a hiring party to provide services in exchange for an amount equal to or greater than $800, either by itself or when aggregated with all contracts for services between the same hiring party and freelance worker during the immediately preceding 120 days.”

Who is not a freelance worker under the NYS Act?

The term “freelance worker” does not include:

(a)        sale representatives (defined in section 191-a of the NY Labor Law);

(b)        attorneys;

(c)        licensed medical professionals; or

(d)        any person who is a construction contractor that offers or undertakes a construction project, which the Act defines as “the providing of any labor or services, and the use of any materials or equipment in order to alter, build, excavate, add to, subtract from, improve, repair, maintain, renovate, move, wreck or demolish any bridge, building, highway, road, railroad, land, tunnel, sewer, drainage or other structure, project, development, or improvement, or the doing of any part thereof, including the erection of scaffolding or other structures or works in connection therewith.”

Who is a hiring party under the NYS Act?

A “hiring party” is any person who retains a freelance worker to provide any service.

Who is not a hiring party under the NYS Act?

The term “hiring party” does not include any federal, state, local or foreign government, or any of its offices, departments, agencies, or other bodies.

What does the NYS Act require?

The NYS Act requires several actions by the parties to a freelancing arrangement, as follows:

  • When a hiring party retains a freelance worker to provide services, the agreement between them must be put into writing.
  • The hiring party must provide a copy of the written agreement to the freelance worker and each party must retain a copy.
  • The hiring party is required to keep a copy of the contract for six years. If the hiring party cannot provide a copy of the contract, there will be a presumption that the terms the freelance worker presents are the agreed upon terms.

What must the written contract include?

Under the NYS Act, all freelance contracts must include:

  • the names and mailing addresses of the parties;
  • a detailed description of the services to be provided;
  • the payment terms for the services (payment date or how to determine, rate and method of compensation), and
  • the date by which the freelance worker must provide a list of services actually provided.

If the contract does not specify a due date for payment (or how to determine such date), then the contracted payment must be paid no later than 30 days after completion of services. Additionally, the hiring party cannot require the freelance worker to accept less than the contracted compensation as condition of timely payment, after the freelance worker has commenced the services under the contract. This does not prohibit the parties from agreeing in the written contract that hiring party can receive a discount for timely payment.

NYSDOL has prepared sample contracts for use by the public which are available at its website.

What are the penalties for not complying with the NYS Act?

Failure to comply with the NYS Act does not render any contract between a hiring party and a freelance worker void or voidable, does not otherwise impair any obligation, claim or right related to such contract, and does not constitute a defense to any action or proceeding to enforce, or for breach of, such contract. However, any waiver of the rights granted under the NYS Act in the contract is deemed void as against public policy.

The NYS Act grants freelance workers a private right of action to sue the hiring party for damages.

Additionally, the Attorney General may bring an action against a hiring party for violating the Act. Penalties include $1,000 for a first violation, $2,000 for a second, and $3,000 for any subsequent violations. If a hiring party is found to have a pattern of violating the NYS Act, then a fine of up to $25,000 may be imposed.

How does the NYS Act affect the New York City Freelance Isn’t Free law?

The NYS Act does not override the New York City Freelance Isn’t Free law (Chapter ten of Title 20 of the NYC Administrative Code), so both laws may apply to certain independent contractor arrangements in certain circumstances, which can lead to some confusion as to compliance with these laws.

If either party is located in New York City or the services are to be performed in the City limits, then the New York City Freelance Isn’t Free law applies, subject to its terms. Most importantly, unlike the NYS Act, the New York City law does not exclude construction contractors as covered freelance workers, so that a written contract is required if the New York City law applies (but is not required if it doesn’t).

On the other hand, the NYS Act has certain requirements that are not part of the New York City Freelance Isn’t Free law, such as requiring a date the freelance worker will provide a list of services actually performed). As a result, if either party is located or the services are to be provided in New York City but the matter does not involve construction, the hiring party must comply with the NYS Act (as doing so will also satisfy the New York City law). Alternatively, if either party is located or the services are to be provided in New York City and the matter does involve construction, the hiring party must comply with the New York City law (and may, if it so elects, comply with the NYS Act).

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For further information or guidance on how this law may affect your business, or for assistance in revising your policies and procedures in accordance with this law, please contact David Paseltiner or Rose Egan.

In our Transparency-is-in-Your-Future series, we have covered the timing and information required in beneficial owner information reports (“BOI reports”), what determines a beneficial owner of a reporting company, and the 23 exemptions to a reporting company under the Corporate Transparency Act (“CTA”). As a reminder, for those entities existing before January 1, 2024, initial BOI reports must be filed on or prior to January 1, 2025.

On September 23, 2024, FinCEN released the below bulletin announcing it is hosting a virtual information session on BOI reports on September 25, 2024 at 2pm ET:

September 25: FinCEN Virtual Info Session on Beneficial Ownership Reporting

The Corporate Transparency Act requires many companies doing business in the United States to report information to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) about who ultimately owns or controls them. Join a FinCEN representative for a virtual information session on beneficial ownership information (BOI) reporting requirements and how to comply with the law.

WHAT: Info session on beneficial ownership reporting

WHEN: Wednesday, Sept. 25, 2024, at 2 p.m. ET

WHERE: www.youtube.com/@fincentreasury

Filing BOI is simple, secure, and free of charge. For more information on the reporting process, visit https://www.fincen.gov/boi .

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Additionally, FinCEN has prepared Frequently Asked Questions (FAQs available here) in response to inquiries received relating to the Beneficial Ownership Information Reporting Rule.

Each entity that is a reporting company should collect the necessary information for itself and its beneficial owners. To ensure compliance with these regulations, all entities should review their internal procedures and organizational documents. Ideally, an entity’s corporate governance documents (e.g. shareholders’ agreement, operating agreement, partnership agreement, etc.) will (1) require its owners to timely disclose the information required to be provided under the CTA (or other applicable federal or state laws, such as the newly enacted NY LLC Transparency Act), (2) provide for consequences for failing to do so, and (3) provide that the entity can disclose the information to FinCEN or as otherwise required by applicable law.

For further information or guidance on revising your policies, procedures, and corporate governance agreements, please contact David Paseltiner or Rose Egan. You can follow our blog for more information as it becomes available.

For those of you following our Transparency-is-in-Your-Future series, you already know that the Corporate Transparency Act (“CTA”) went into effect on January 1, 2024 and now entities of all shapes and sizes are scrambling to figure out what information they need to report and when, or if they are perhaps exempt from the reporting requirements altogether.

As an update, the CTA (31 CFR 1010.380) was revised to provide a new reporting schedule for filing an initial report with U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). as outlined below:

Additionally, a reporting company must file a report within 30 calendar days after the date that (x) a change in beneficial ownership occurs or (y) the reporting company becomes aware or has reason to know of an inaccuracy in its report.

We now turn our focus to reporting companies and the 23 exemptions established in the CTA.

What is a reporting company under the CTA?

The term “reporting company” includes any entity created (or, for an entity formed under the laws of a foreign country, registered to do business in the US) by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe. Accordingly, if not otherwise exempt, reporting companies include corporations, limited liability companies, limited partnerships, limited liability partnerships and limited liability limited partnerships (where they exist), and potentially other professional service entities.

What entities are exempt from reporting under the CTA?

The term “reporting company” does not include (each of which is described in more detail below):

What is an “investment company or investment adviser” under the CTA?

Any entity that is: (a) an investment company as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a-3), or is an investment adviser as defined in section 202 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2); and (b) Registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq. ) or the Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.).

What is a “venture capital fund adviser” under the CTA?

Any investment adviser that: (a) is described in section 203(l) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(l)); and (b) has filed Item 10, Schedule A, and Schedule B of Part 1A of Form ADV, or any successor thereto, with the Securities and Exchange Commission.

What is an “accounting firm” under the CTA?

Any public accounting firm registered in accordance with section 102 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7212).

What is a “pooled investment vehicle” under the CTA?

Any pooled investment vehicle that is operated or advised by a bank, credit union, broker or dealer in securities, investment company or adviser, or venture capital fund adviser, each as defined in the CTA.

What is a “tax exempt entity” under the CTA?

Any entity that is:

(a)          an organization that is described in section 501(c) of the Internal Revenue Code of 1986 (Code) (determined without regard to section 508(a) of the Code) and exempt from tax under section 501(a) of the Code, except that in the case of any such organization that ceases to be described in section 501(c) and exempt from tax under section 501(a), such organization shall be considered to continue to be exempt for the 180-day period beginning on the date of the loss of such tax-exempt status;

(b)          a political organization, as defined in section 527(e)(1) of the Code, that is exempt from tax under section 527(a) of the Code; or

(c)          a trust described in paragraph (1) or (2) of section 4947(a) of the Code.

What is an “entity assisting a tax exempt entity” under the CTA?

Any entity that:

(a)          operates exclusively to provide financial assistance to, or hold governance rights over, any entity described as a “tax exempt entity” under the CTA;

(b)          is a United States person;

(c)          is beneficially owned or controlled exclusively by one or more United States persons that are United States citizens or lawfully admitted for permanent residence; and

(d)         derives at least a majority of its funding or revenue from one or more United States persons that are United States citizens or lawfully admitted for permanent residence.

What is a “large operating company” under the CTA?

Any entity that:

(a)          employs more than 20 full time employees in the United States, with “full time employee in the United States” having the meaning provided in 26 CFR 54.4980H-1(a) and 54.4980H-3, except that the term “United States” means “the States of the United States, the District of Columbia, the Indian lands (as that term is defined in the Indian Gaming Regulatory Act), and the Territories and Insular Possessions of the United States” (such as Puerto Rico, U.S. Virgin Islands, Guam, etc.);

(b)          has an operating presence at a physical office within the United States; and

(c)          filed a Federal income tax or information return in the United States for the previous year demonstrating more than $5,000,000 in gross receipts or sales, as reported as gross receipts or sales (net of returns and allowances) on the entity’s IRS Form 1120, consolidated IRS Form 1120, IRS Form 1120-S, IRS Form 1065, or other applicable IRS form, excluding gross receipts or sales from sources outside the United States, as determined under Federal income tax principles.

                For an entity that is part of an affiliated group of corporations within the meaning of 26 U.S.C. 1504 that filed a consolidated return, the applicable amount shall be the amount reported on the consolidated return for such group. However, the large operating company exemption requires that the entity itself employ more than 20 full-time employees in the United States and does not permit consolidation of this employee count across multiple entities.

What is a “subsidiary of certain exempt entities” under the CTA?

Any entity whose ownership interests are controlled or wholly owned, directly or indirectly, by one or more entities described in the CTA, except for a money services business or a pooled investment vehicle, or an entity assisting a tax exempt entity as defined under the CTA.

What is an “inactive entity” under the CTA?

Any entity that:

(a)          was in existence on or before January 1, 2020;

(b)          is not engaged in active business;

(c)          is not owned by a foreign person, whether directly or indirectly, wholly or partially;

(d)         has not experienced any change in ownership in the preceding twelve month period;

(e)          has not sent or received any funds in an amount greater than $1,000, either directly or through any financial account in which the entity or any affiliate of the entity had an interest, in the preceding twelve month period; and

(f)           does not otherwise hold any kind or type of assets, whether in the United States or abroad, including any ownership interest in any corporation, limited liability company, or other similar entity.

How does a company report to FinCEN that it is exempt?

A company does not need to report to FinCEN that it is exempt from the BOI reporting requirements if it has always been exempt.

If a company filed a BOI report and later qualifies for an exemption, that company should file an updated BOI report to indicate that it is newly exempt from the reporting requirements. Updated BOI reports are filed electronically though the secure filing system. An updated BOI report for a newly exempt entity will only require that the entity: (1) identify itself; and (2) check a box noting its newly exempt status.

Alternatively, if a company no longer qualifies for an exemption, it must file a BOI report within 30 calendar days after the date that it no longer meets the criteria for any exemption.

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Entities should review the CTA and FinCEN regulations to confirm whether they must file a BOI report or are eligible for an exemption. Each entity that is a reporting company should collect the necessary information for itself and its beneficial owners. To ensure compliance with these regulations, all entities should review their internal procedures and organizational documents. Ideally, an entity’s corporate governance documents (e.g. shareholders’ agreement, operating agreement, partnership agreement, etc.) will (1) require its owners to timely disclose the information required to be provided under the CTA (or other applicable federal or state laws, such as the newly enacted NY LLC Transparency Act), (2) provide for consequences for failing to do so, and (3) provide that the entity can disclose the information to FinCEN or as otherwise required by applicable law.

For further information or guidance on revising your policies, procedures, and corporate governance agreements, please contact David Paseltiner or Rose Egan. You can follow our blog for more information as it becomes available.