CTA For Small Businesses: What Companies Are Exempt from Reporting Under the CTA?

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) will, starting 1/1/2024, require millions of US businesses to file a report disclosing their “Beneficial Owners” (BOs) or face civil and criminal liability. The CTA and FinCEN’s regulations define what is a “reporting company” that must file; they also allow for several exemptions. 

The following entities are exempt from reporting under the CTA; that is, they do not have to file a BO report. Note that many of them are publicly owned, in the field of financial services, or have other qualities that make it likely that their ownership and structure are already known or easily discoverable. Those qualities take them outside the intent of the CTA, which is to make corporate ownership easier to ascertain for criminal investigation purposes. Some of the other exemptions on the list may be more generally helpful, particularly the large operating company exemption (which we will cover in detail in a separate post). 

(i) Securities reporting issuer; 

(ii) Governmental authority; 

(iii) Bank; 

(iv) Credit union;

(v) Depository institution holding company; 

(vi) Money services business; 

(vii) Broker or dealer in securities; 

(viii) Securities exchange or clearing agency; 

(ix) Other Exchange Act registered entity; 

(x) Investment company or investment adviser; 

(xi) Venture capital fund adviser; 

(xii) Insurance company; 

(xiii) State-licensed insurance producer; 

(xiv) Commodity Exchange Act registered entity; 

(xv) Accounting firm; 

(xvi) Public utility;

(xvii) Financial market utility; 

(xviii) Pooled investment vehicle; 

(xix) Tax-exempt entity; 

(xx) Entity assisting a tax-exempt entity; 

(xxi) Large operating company; 

(xxii) Subsidiary of certain exempt entities. Any entity whose ownership interests are controlled or wholly owned, directly or indirectly, by one or more entities described in paragraphs (i), (ii), (iii), (iv), (v), (vii), (viii), (ix), (x), (xi), (xii), (xiii), (xiv), (xv), (xvi), (xvii), (xix), or (xxi) of this list; 

(xxiii) Inactive entity. 

Please note that the above list is only a summary of exemption categories for general informational purposes. Each of these summary exemptions is defined explicitly in the statute, including extensive cross-references to the federal Tax Code, Securities Exchange Act, Investment Company Act, Investment Advisers Act, FDIC Act, Federal Credit Union Act, and other federal laws. Determining whether any given company qualifies for any exemption summarized above requires a review and analysis of the relevant statutory definition in its entirety. 

What to Do Now

If you believe that your company is a reporting company but that it may qualify for an exemption under the above categories, now is a good time to begin gathering formation and governance materials and discussing them with your attorney to confirm whether you are exempt or must report under the CTA. 

As noted, we will publish a separate item detailing the “large operating company exemption,” which despite its name is likely to apply to many small entities and may afford them an exemption from reporting under the CTA. 

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