New Update to FinCEN CTA FAQ Clarifies Tax Filing Data to be Used for "Large Operating Company" Exemption

If you think your company may qualify for the “large operating company” exemption from filing under the Corporate Transparency Act, good news: the applicable tax filing year has been clarified.  As a reminder, companies that report $5 million or more in gross US sales or receipts the prior year may be exempt from the CTA's requirements if they meet other conditions as well.  The regulators have now clarified whether that means $5 million as reported on the company tax return “in” the prior year or “for” the prior year.  Per a new FAQ issued in mid-June, the answer is that “to the extent a tax…return for the previous year was not filed in the previous year,” the company “should use the return filed in the previous year[.]”   

WHY IT MATTERS

Many companies are wrestling with their CTA reporting obligations, including whether the law applies to them or offers them an exemption.  And, of course, most companies do not file a tax return “for” a particular year “in” that particular year, since most returns are submitted the year after the relevant tax period.  By clarifying and standardizing the definition – use the return you filed last year if the return's year and the reporting year differ – the new FAQ may make it easier to ascertain compliance obligations for companies that are on the cusp of the “large operating company” exemption.  If you are one such company, and you filed a 2022 tax return in 2023, that 2022's is the relevant return for determining whether you are afforded an exemption.  If your reported revenue changes in subsequent returns, note that you may be obliged to file an update.