By Kelly Phillips Erb | Forbes
A 2021 law, the Corporate Transparency Act—or CTA—which requires reporting companies to file reports with FinCEN, the Financial Crimes Enforcement Network, is getting new looks from the tax and business communities. Here’s what the commotion is about—starting Jan. 1, 2024, many companies will be required to report information to the U.S. government about who ultimately owns and controls them. Many say they’re not ready.
Background
The House passed the initial version of the CTA in 2019 with a 249-173 vote. It didn’t make its way to a full Congressional vote until the next year, when it was added to the fiscal year 2021 National Defense Authorization Act (NDAA). The House version passed by a vote of 295-125 and a Senate version passed by a vote of 86-14. Eventually, the final version of the bill was agreed on by the House and Senate in December 2020, where it was promptly vetoed for, among other things, not repealing section 230 of the 1996 Communications Decency Act (two other sticking points included increases to stimulus checks and starting an investigation into alleged voter fraud).
When the bill went back to Congress, Senate Majority Leader Mitch McConnell (R-KY) urged his colleagues to overturn the veto, saying, “For the brave men and women of the United States armed forces, failure is not an option. So when it is our turn in Congress to have their backs, failure is not an option here either. I urge my colleagues to support this legislation one more time.” The veto was quickly overridden with a House vote of 322-87 and a Senate vote of 81-13 on January 1, 2021.
“CTA compliance should not be taken lightly as the penalties are steep for even the intermediaries that help setup the entities.” -Shruti Gurudanti, Rose Law Group Corporate Transactions Director
