Corporate Transparency Act – Update

In Tax Matters Vol 2022–6, we provided initial information regarding the Corporate Transparency Act ("CTA"). Many businesses will be required to comply with the CTA beginning January 1, 2024. There have been several questions regarding whether accounting firms can provide services related to the CTA as such may considered an unauthorized practice of law. Therefore, we have made the difficult decision that we cannot provide these services until further guidance clarifies this issue. We recommend that anyone with a potential CTA reporting requirement consult with their legal counsel.

Below please find key reporting dates that were updated as of December 1, 2023. These reports assume that the entity does not qualify for an exemption.

1)   Any existing entity (created or registered before January 1, 2024) that does not qualify for an exemption must file a BOI Report no later than January 1, 2025.

2)   Any new entity (created or registered on or after January 1, 2024, but before January 1, 2025) that does not qualify for an exemption must file a BOI Report within 90 days after the entity's formation date.

3)   Any new entity (created or registered on or after January 1, 2025) that does not qualify for an exemption must file a BOI Report within 30 days after the entity's formation date.

Currently there are 23 exemptions from reporting, most of which we do not expect to apply to our clients. There is an exemption for a "large operating company," however, which may apply and has 6 criteria, as follows, that must be met.

1. The entity employs more than 20 full time employees under complex U.S. rules. In general, "full-time employee" means, with respect to a calendar month, an employee who is employed an average of at least 30 hours of service per week with an employer.
   
2. More than 20 full-time employees of the entity are employed in the "United States,".
3. The entity has an operating presence at a physical office within the United States. "Operating presence at a physical office within the United States" means that an entity regularly conducts its business at a physical location in the United States that the entity owns or leases and that is physically distinct from the place of business of any other unaffiliated entity.
4. The entity 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. If the entity is part of an affiliated group of corporations, refer to the consolidated return for such group.
   
5. The entity reported this greater-than-$5,000,000 amount 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.
6. When gross receipts or sales from sources outside the United States, as determined under Federal income tax principle, are excluded from the entity's amount of gross receipts or sales, the amount remains greater than $5,000,000.

Please consult with your legal counsel to determine if this exemption or any other exemption may apply as well as to determine your specific reporting requirements under the CTA.

If you have any questions, please contact your local Rödl and Partner representative. 

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