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Categories Uncategorized Author Mathew Finkelson-Reece

Key Provisions of The Corporate Transparency Act

The Corporate Transparency Act (CTA) is a significant legislative measure in the United States aimed at enhancing transparency in corporate ownership and combating illicit financial activities. Enacted as part of the National Defense Authorization Act for Fiscal Year 2021, this Act represents a pivotal step in addressing issues related to anonymous shell companies and their potential use in money laundering, tax evasion, and other forms of illicit finance.

The CTA mandates certain corporations, particularly those formed or registered in the U.S., to disclose beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. Beneficial ownership information includes the identities of individuals who directly or indirectly own or control a significant interest in a corporation.

Key aspects of the Corporate Transparency Act include:

  1. Reporting Requirements: Corporations covered by the Act must report beneficial ownership information, including the names, addresses, dates of birth, and unique identification numbers of the beneficial owners, to FinCEN.
  2. Thresholds and Exemptions: There are thresholds determining who qualifies as a beneficial owner, and certain entities, such as publicly traded companies, are exempt from reporting.
  3. Privacy Protections: The Act includes measures to safeguard sensitive information and restricts access to disclosed data to authorized entities for specific purposes, such as law enforcement investigations.
  4. Penalties for Non-Compliance: Failure to comply with reporting requirements or providing false information may result in civil and criminal penalties.

CTA is crucial for business owners, as it mandates specific reporting requirements related to beneficial ownership information. This legislation aims to enhance transparency within corporations and combat illicit financial activities, ultimately impacting various aspects of business operations. Here’s a comprehensive guide for business owners outlining key actions necessary to comply with the Corporate Transparency Act.

Understanding Applicability

The first step for business owners is to determine whether their entity falls under the purview of the Corporate Transparency Act. The Act primarily targets certain corporations formed or registered in the United States, excluding publicly traded companies and some other specific entities. Identifying whether your business meets the criteria for reporting is essential.

Assessment of Beneficial Ownership

Once the applicability is established, business owners must conduct a thorough assessment of beneficial ownership within their organization. Beneficial owners are individuals who directly or indirectly hold a significant interest in the company (measured at 25%) or exercise substantial control over its operations. Identifying these individuals, gathering their information, including names, addresses, dates of birth, and unique identification numbers, the government has determined is pivotal for compliance.

Reporting to FinCEN

Entities covered by the CTA are required to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). Business owners need to compile accurate and up-to-date information about beneficial owners and submit the required data to FinCEN within the specified deadlines. Applicable businesses must file by January 1, 2025.

Ensuring Data Accuracy and Security

Accuracy and confidentiality are paramount when disclosing beneficial ownership information. Business owners must take measures to ensure the accuracy of the data provided to FinCEN. Additionally, implementing robust data security measures to safeguard sensitive information from unauthorized access or misuse is crucial.

Compliance Management

Establishing an internal compliance program is essential for ongoing adherence to the Corporate Transparency Act. This program should include regular assessments, updates to beneficial ownership information, and employee training to ensure continued compliance with reporting requirements.

Seeking Legal and Professional Assistance

Given the complexities involved in compliance with the Corporate Transparency Act, seeking legal counsel or professional assistance is highly recommended. Consulting with experts well-versed in corporate governance, compliance, and regulatory matters can provide invaluable guidance in navigating the requirements of the Act and ensuring accurate and timely reporting.

Future Considerations

Business owners should also anticipate potential changes in regulations, ensuring their compliance programs remain adaptable to evolving regulatory landscapes. Staying informed about updates, guidance, and interpretations related to the Corporate Transparency Act is crucial for continued adherence.

Conclusion

Compliance with the Corporate Transparency Act is an essential responsibility for business owners. By understanding the Act’s requirements, accurately reporting beneficial ownership information, and establishing robust compliance measures, businesses can not only ensure adherence to regulatory standards but also contribute to a more transparent and secure corporate environment. Seeking professional advice, maintaining data accuracy, and adapting to changing regulatory requirements are key pillars in successfully complying with this legislation.

Categories Tax Author Mathew Finkelson-Reece

Tyreek Hill and State Income Taxes

Recently, star Miami Dolphins Wide-Receiver Tyreek Hill was asked why he signed a 4-year contract with the Dolphins over the New York Jets. Hill honestly and shortly answered, “Just those state taxes man. I had to make a grown-up decision.” Hill was referring to the state income taxes of New Jersey, which has a marginal income tax rate of 10.75% for those earning over $5 million a year. Hill’s contract is for a reported $30 million a year, thus he could be paying New Jersey State income tax of roughly $3 million had he selected the Jets. The State of Florida does not impose an income tax and upon establishing residency, he will not pay any income tax on what he earns in the state.

*Note that Hill will still be required to pay income tax on his salary to the state where his away games are located.*

State income tax is imposed by a state on income earned from the state or in it. Like federal income tax, state income tax is self-assessed, meaning taxpayers must file state tax returns. There are currently eight states that have not imposed a tax on income: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. Although New Hampshire doesn’t tax earned income, the NH government still taxes unearned income such as dividends and interest. Though by 2027, the NH government plans on abolishing all individual income tax.

While some states impose zero income tax, California imposes the highest marginal tax rate at 13.3% of taxable income over $1,000,000. Because of these high marginal tax rates, sport franchises located in California and New York/New Jersey can find themselves at a steep disadvantage compared to those located in Texas and Florida when it comes to compensating athletes.

A pertinent example being that of Tyreek Hill’s experience.

Other than the sunny, beautiful beaches and the eclectic population, it can be insinuated that Hill is not the only person who has assessed their options for residency and evaluated the choices contingent upon tax-related measures; perhaps why many of the United States’ wealthiest individuals choose to reside in Florida.

In many states, if you are a resident, it means all income earned in any capacity will be tax subject to that state’s income tax. However, you can take a credit for the income tax paid on income from out of state. Also as previously stated, even if you are a resident of a state that does not impose income tax, you will still be subject to tax if the income is earned in another state where income tax is imposed.

Tyreek Hill will be subject to income tax for the salary he earns when he scores a touchdown in the Meadowlands when the Dolphins travel to New Jersey once a year. However, the state income tax savings of him being a Florida Resident and playing for the Dolphins are going to be astronomical. For reasons like this, the taxation of individuals working and earning income in multiple states can get complicated. It is recommended to talk to a professional consultant when facing State Income Tax Issues. Feel free to reach out to Janus, Curran, Finkelson-Reece, PLLC Certified Public Accountants if you would like to discuss.

-Mathew Finkelson-Reece is a licensed Certified Public Accountant in the States of Florida and Pennsylvania, he also holds an Accreditation in Business Valuation from the American Institute of Certified Public Accountants. He can be reached at mreece@janus-curran.com/