Home Health & Hospice Week

Avoid getting tripped up by latest federal reporting requirement for beneficial owners.

A new federal regulation may add to your paperwork burden — or worse.

The Corporate Transparency Act, effective back on Jan. 1, requires individuals with “substantial control” in certain organizations — beneficial owners — to register with the Financial Crimes Enforcement Network (FinCEN), a new bureau of the U.S. Department of the Treasury. Beneficial owners are defined as anyone that owns or controls 25 percent or more of the equity, economics or profits, and anybody who exercises “substantial control” over a company.

Watch out: Companies will face “significant financial penalties for non-compliance,” warn attorneys Chad Sukurs, Jeff Peek, John Bowen, Kelci Laster, and Eric Speer with law firm Hall Render in online analysis of the new reg.

Penalties for failure to comply are high at $500 to $10,000 a day, and up to a two-year prison sentence (per occurrence).

If you’re wondering if you’ll be affected, the answer is likely yes. “Any entity that is created by filing with a Secretary of State (or tribal jurisdiction) is deemed a ‘Reporting Company’ subject to the CTA,” the Hall Render attorneys stress. “More specifically, the CTA will impact the owners and directors of almost all limited liability companies, corporations, limited liability partnerships, professional corporations and other closely held entities that fail to qualify for an exemption.”

Bottom line: “Most small businesses will be subject to the reporting rules,” the Hall Render lawyers conclude.

Companies required to comply must file their initial FinCEN report by the following timeframes:

• Existing companies i.e., those registered before Jan. 1, 2024, must file an initial report within one year or Jan. 1, 2025.
• Companies created or registered after Jan. 1, 2024 must file an initial report within 90 calendar days after receiving actual or public notice that their company’s creation or registration is effective.
• Companies created or registered on or after Jan. 1, 2025, must file within 30 calendar days after receiving actual or public notice that its creation or registration is effective.
• Changes or corrections to any company’s filing must be reported within 30 days of the change (e.g., change of address or beneficial owner.)

The CTA was created as part of the Anti-Money Laundering Act of 2020 and mandated the disclosure of beneficial owners’ information as well as creation of a new database — the Beneficial Ownership Secure System (BOSS).

The CTA’s stated purpose is to combat money laundering, terrorism, tax evasion and the concealing of other financial crimes through “shell” corporations or other entities. FinCEN will collect, analyze, maintain and disseminate financial transaction data to safeguard the financial system from such illicit use.

Many privately owned entities are considered “reporting companies,” including corporations, limited liability companies (LLCs), limited partnerships, statutory trusts, and any entity created by filing with a state’s Secretary of State (or any similar office under the law of a state or Indian tribe) — this includes healthcare providers such as home health and hospice agencies.

Beneficial owners you must report include, for example, company officers and directors. However, the inclusion of indirect owners creates a more complex and expansive range of who qualifies as a beneficial owner.

Exceptions to the reporting are relatively narrow (see story, p. 61).

There is no specific exemption for healthcare entities, the Hall Render attorneys warn. However, larger healthcare entities and many tax-exempt ones may circumvent the new requirements if they qualify for an exemption.

Here’s What’s Required