In a prior post, I addressed some of the 23 exemptions the Corporate Transparency Act provides that would excuse a company from filing. Many of the exemptions relate to entities that are of less concern (non-profits, government entities) for committing financial crimes; the bulk are for entities (banks, broker/dealers, investment advisers, pooled investment vehicles, etc.) that are otherwise regulated because of their work in the financial sector.
One major exemption that is not tied to the nature of the company itself could be a huge help to many businesses thinking about compliance next year: the large operating company exemption. As with other items in the CTA, there are complexities and nuances to this exemption that may require legal or accounting counsel to parse; but if it covers your company, it will excuse you from compliance with the CTA.
What Is It?
The exemption for “large operating companies” has three prongs; all are required to qualify: more than $5M gross receipts/sales, at least 20 employees (FTEs) in the US, and an operating presence at a physical office in the US.
Why It Matters
The calculation of gross receipts/sales depends on reference to the tax code and tax forms filed the previous year. Note that the applicable sales figure for entities that are part of a group filing a consolidated return is the consolidated sales. Also note that if you have a banner year in 2023 that exempts you from filing in 2024, but dip below the $5M threshold in a later year, you may have to file at that point.
Figuring out how many FTEs you have in the US full-time is a function of the tax provisions that apply to counting FTEs for purposes of Affordable Care Act compliance. This is a more complicated undertaking and should be done with tax counsel and your CPA if you have any questions. We have published a separate post that covers the essentials of the calculation.
Finally, you must have an operating place of business “within” the US. If your operations occur offshore, you cannot qualify even if you meet the other two prongs.