On December 3, 2024, the US District Court for the Eastern District of Texas issued an injunction which halts the implementation of the Corporate Transparency Act (click here to read the opinion). This means that the Corporate Transparency Act will not be enforced as of January 1, 2025. However, the decision has been appealed and is therefore subject to change in 2025. Check back here for the most recent developments as this article will be updated regularly.

Enacted in January 2021 to help fight crime, including money laundering and fraud, the Corporate Transparency Act (CTA) is a new federal law that aims to increase transparency around U.S. businesses’ ownership. Before the CTA, businesses could sometimes be controlled by anonymous owners, which gave bad actors the opportunity to use those businesses for money laundering, fraud, and/or other crimes.

The CTA’s goal is to prevent some of these crimes by requiring businesses to disclose their ownership. The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) is responsible for administering the CTA.

The CTA applies to all businesses that it defines as “reporting companies.” The definition of a reporting company under the CTA is very broad and includes corporations, LLCs, and “other similar entities.”

There are some types of businesses which are exempt from the CTA, including banks, certain insurance companies, churches, charities, and many trusts.The CTA applies to most privately-owned real estate companies, except those that fall under an exemption.  

The CTA requires that reporting companies provide information about both the company itself and its owners to FinCEN. The following company information must be reported:

• full business name,
• all trade and “doing business as” names,
• the address of the company’s principal place of business,
• the jurisdiction where the business was formed or registered, 
• the business’ Taxpayer Identification Number

The CTA also requires reporting companies to provide information about the people who “beneficially own” and/ or “substantially control” the business. The law defines beneficial owners as those who own or control at least 25% of the ownership interests in the company and/or “substantially control” its business operations. Senior officers, such as general counsel, CFOs, COOs, CEOs, and Presidents, are automatically assumed to have “substantial control” over the companies they work for.

Additionally, any person who has “any other form of substantial control,” such as the authority to appoint or remove officers or decision-making power over significant matters, must be reported to FinCEN. Finally, reporting companies created on or after January 1, 2024 must also report information about the “company applicant,” which is the person(s) who handles the registration and filing of the company.

The CTA requires that the following information be reported about the company’s owner(s):

• full legal name,
• date of birth,
• residential address (P.O. boxes are not permitted)

Additionally, the beneficial owner(s) will be required to submit “an identifying number from an acceptable identification document such as a passport or U.S. driver’s license, and the name of the issuing state or jurisdiction.”^[1] Beneficial owners who are concerned about data privacy can report their information to FinCEN directly, rather than to the reporting company.^[2]

Failure to report as required (including amendments, as necessary) will carry both civil penalties, including $591 per day in fines, and the possibility of criminal prosecution.

As the law was originally written, the CTA was intended to fully go into effect on January 1, 2025. However, on December 3, 2024, a federal district court issued an injunction that prevents the CTA from being enforced. This means that FinCEN may not require any business comply with the act and cannot punish businesses that do not submit their information. (But businesses are free to voluntarily submit their information, if they would like.) The federal government appealed the district court’s ruling, so it is possible that the CTA could be enforced at a later date. This article will be updated regularly.

It can be daunting to begin planning how to get your real estate company in compliance with the new law. If you have questions about whether or how the CTA applies to your business, you should seek legal advice from an experienced attorney. Assuming your company is subject to the CTA’s reporting requirements, the following plan is a general guide to reporting under the CTA.

• Step 1: Brainstorm a list of all the people and entities that own an interest in or substantially control your real estate company. For some, this process will be simple. For others, especially large companies, this process could take a while. If you have any uncertainty during this step, you should consult a professional – this will be the foundation for the rest of the process. If you have multiple businesses and you think one or more might be exempt from the CTA, this would also be the time to speak with an attorney about that.
• Step 2: Contact the people and entities you identified to let them know that you will be reporting their information to comply with CTA and to confirm that the information you have for them is accurate. If any beneficial owners wish to report their own information directly to FinCEN, assist them with the process to ensure they will be able to provide the required information and provide you with the FinCEN identification number you will need for your records.
• Step 3: Store the information that you have gathered in a database that can be viewed and edited in the future. Give special consideration to how you are going to keep this information safe – it is a best practice to have a professional assist with this if you are storing protected personal information.
• Step 4: Create a system for reverifying the information and updating the database. Be sure that beneficial owners understand that they are under a continued requirement to update their information.  

In the future: If you plan to create or acquire new real estate companies in the future, ensure they comply with the CTA by having a plan for compliance prior to formation/ purchase of the company and speak to an attorney to ensure that the company’s key documents reflect compliance with the CTA.

Recommended Research: View the resources and reference materials FinCEN has created regarding the CTA here. FinCEN also has resources specifically geared towards small businesses, available here.

I am a broker or owner of an existing real estate company in Alabama – does this law apply to me?  

• Most likely, unless your business falls under an exception. We recommend meeting with an attorney as soon as possible to determine whether the CTA applies to your business.

I am an agent with a real estate company and have my own LLC through which I receive payments from my broker. Does this law apply to my LLC?

• Similarly to brokers and owners of the brokerage, your LLC will most likely be covered under the CTA. We recommend meeting with an attorney as soon as possible to determine whether the CTA applies to your LLC.

I own multiple companies, including a referral company and a property management company – does the CTA require me to file a report for each company?  

• Yes. Beneficial owners must file a separate report for each of their companies that is covered by the CTA.

I am an owner of a real estate company that has multiple branch offices. Will I be required to file a separate report for each branch office?

• It depends. If the branch offices are considered to be separate franchises and distinct legal entities, then you will need to file a report for each one. If they have no legal structural distinctions other than merely different locations of the same parent company, then you will only need to file one report. We recommend meeting with an attorney to make this determination.  

Is this a one-time registration?

• No, the law imposes an ongoing duty to report. After the initial registration, companies must also report any changes in ownership to FinCEN within 30 days of the change occurring. Additionally, companies will be required to timely correct any errors in reports submitted.  

What does FinCEN cost to file?

• FinCEN does not charge a fee for filing under the Corporate Transparency Act.

How do I report my company/ beneficial owner information?

• Reporting companies can submit their filing to FinCEN using the form found here.  

What is the penalty for failing to file or filing incorrect information?

• Failing to file or filing incorrect information could result in a fine of $591 per day, up to $10,000, and up to 2 years in prison.

I am planning to create a new company in 2024 or after, when will I need to file with FinCen?

• If the CTA is enforced in the future, you will have 90 days from the time your new company was formed  to report the company information, company applicant information, and beneficial owner information to FinCEN.

Does NAR have guidance on the CTA?

• Yes. NAR published articles related to the CTA in both February and April 2023. Additional information from NAR can be found here.

Will local associations be required to file under the new law?

• A: No, local associations that organized as 501(c)(6) organizations under the IRS Code are exempt from this law.

NOTE: Additional guidance can be found at https://www.fincen.gov/boi-faqs#A_1 and BOI Access and Safeguards SECG (fincen.gov).