Corporate Transparency Act: A New Regulatory Requirement for Business

The U.S. House of Representatives passed the Corporate Transparency Act of 2019 (HR 2513) by a vote of 249-173, including 25 Republicans, on Oct. 22, 2019. A companion bill is being reviewed by the Senate. The purpose of HR 2513 is to create a national database of the beneficial owners (Beneficial Owners) of corporations and limited liability companies (LLCs) in the United States "to assist law enforcement in detecting, preventing, and punishing terrorism, money laundering, and other misconduct." The bill requires that corporations, LLCs and other entities that may be covered by the law (Affected Entities) would have to register with the government and update the registration annually. (The phrase "Affected Entity" is not used in HR 2513, but is included in this Holland & Knight alert to facilitate an understanding of the proposed law.)

Overview of Bill's Requirements

HR 2513 would require every covered Affected Entity to register its Beneficial Owners with the Financial Crimes Enforcement Network (FinCEN) and, within two years after enactment, the 2 million existing corporations and LLCs would be required to register their Beneficial Owners. A covered Affected Entity would be a corporation or LLC formed under local state law, and any non-U.S. entity eligible for registration in a state, but would not include the following: an issuer of registered securities, a business charted by states as an interstate company between two states, a depository institution under the Federal Deposit Insurance Act, a credit union, a bank holding company, a broker-dealer, an exchange or clearing agency, an investment company registered with the U.S. Securities and Exchange Commission (SEC), an insurance company, a registered entity under the Commodity Exchange Act, a public accounting firm, a public utility, a church, charity, nonprofit entity as described in the Internal Revenue Code, a financial market utility, an insurance producer, a pooled investment vehicle, or any business concern that employs more than 20 full-time employees in the U.S., files income tax returns, has an operating presence or physical office in the U.S., or a businesses that the Secretary of the Treasury or U.S. Attorney General have jointly determined is not required to register.

HR 2513 also provides that the Office of the Comptroller of the Currency would have two years to complete a study of what other business entities should be covered, including partnerships, trusts or...