On May 5, NMHC, along with a coalition of real estate trade groups, submitted a comment letter to the Financial Crimes Enforcement Network (FinCEN) on their Advanced Notice of Proposed Rule Making (ANPRM) on the Corporate Transparency Act (CTA) that was passed as part of the 2021 National Defense Authorization Act. As previously reported, the CTA requires businesses who form limited liability companies to fully disclose the beneficial owners of that business entity.
Law enforcement agencies globally have asked for, and received, mandates for businesses to disclose more information on beneficial ownership to curb money laundering, fight terrorism financing and identify illegal or criminal activities that have been sheltered by LLCs or shell companies.
The CTA requires every LLC, corporation or similar entity to report beneficial ownership data into a national database maintained by FinCEN an agency within the U.S. Treasury.
The new reporting process will require that:
- Every newly formed LLC, corporation or similar entity to be entered into the FinCEN system by the business entity;
- Every LLC, corporation or similar entity formed prior to enactment of this new protocol, will also have to enter its beneficial ownership information into the FinCEN database; and
- Changes to the beneficial ownership of any LLC, corporation or similar entity must be entered into the FinCEN database within one year of the change.
The coalition’s response to the ANPRM highlighted the following issues:
- The regulations must be clearly defined and transparent.
- FinCEN must develop a communication plan to inform the business community of their reporting obligations.
- Expressed concerns for small business owners who may lack the sophistication to easily comply with the requirements.
- Reporting and filing methodology and accuracy.
- Access to the information in the database.
FinCEN must issue final regulations implementing the reporting requirements by January 1, 2022. The effective date of the reporting requirements is yet to be determined. FinCEN is expected to issue the proposed reporting requirements sometime this summer, at which time they will seek public comment again.
NMHC and the real estate coalition will seek to engage FinCEN to provide input as they work to produce the final regulations.