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Last Updated : May 23, 2024

The 2024 Corporate Transparency Act Explained

Introduction

In this episode, we delve into a critical topic that Real Estate Investors must be aware of: The 2024 Corporate Transparency Act. With regulatory changes set to take effect on January 1st, 2024, you’ll want to know what this act means for you and your investment properties.

Background

The Corporate Transparency Act outlines new reporting requirements for entities formed or registered to do business in the United States. Specifically, it requires these entities to disclose certain information about their beneficial owners to FinCEN, the Financial Crimes Enforcement Network. Although there are exemptions, it’s important to note that most Real Estate Investors will not qualify for these.

The Exemptions

  1. Large Operating Companies: Entities that have more than 20 full-time U.S. employees, reported more than $5 million of revenue from U.S. sources to the IRS for the previous year, and have a physical location in the U.S.

  2. Nonprofits and Political Organizations: Includes tax-exempt trusts and political organizations.

  3. Regulated Entities: Such as public companies, insurance companies, banks, and registered investment companies.

Why Is This Important?

Real Estate Investors commonly use LLCs and other entities for holding properties. Unless you qualify for an exemption, your entity will likely be subject to the Corporate Transparency Act. This means additional reporting requirements and potentially more administrative work for you.

What Are the Reporting Requirements?

If subject to the act, you must submit a Beneficial Ownership Information Report to FinCEN. This report will disclose:

  • Your name, address, and taxpayer identification number
  • Names, birth dates, and addresses of all beneficial owners
  • Photocopies of identification, like driver’s licenses or passports

Beneficial owners are defined as any individual who directly or indirectly exercises substantial control over the entity or owns 25% or more of the ownership interest.

Compliance Deadlines

  • Existing Entities: If your entity was formed before January 1, 2024, you have until January 1, 2025, to submit your initial report.

  • New Entities: If your entity is formed on or after January 1, 2024, your initial report is due within 30 days of formation.

Important: An amendment must be filed within 30 days after any change in the reported information.

Final Thoughts

It’s crucial to review these requirements carefully and consult with your attorney to ensure compliance. Although the act aims to deter fraudulent activities, it may come at the cost of privacy and an increased administrative burden. So, as we navigate these regulatory changes, staying informed is your first line of defense.

We’ll continue to provide you with the latest tax strategies and updates, ensuring you stay tax smart in your real estate investments.

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Listen to this podcast episode here.