The Corporate Transparency Act (CTA) was enacted in 2021 and the requirement to disclose beneficial ownership information (BOI) became effective in January 2024.

Additional Reporting Requirements

Beyond the standard reporting requirements, there are additional considerations for reporting companies, both old and new. For reporting companies in existence before 2024, their deadline for the initial BOI report is Dec. 31, 2024, of this year. In addition to the beneficial ownership information, the reporting company must disclose information about itself. That information includes the below: 

• Legal name including any DBA or other trade name
• Mailing address
• Jurisdiction where it is incorporated or registered
• Tax identification number (TIN)

Operating companies that have been in business for years will already have an employer identification number (EIN), which acts as their TIN for the BOI report. However, not every entity that has existed prior to 2024 has been an active trade or business with an EIN. Some companies are used to hold art, airplanes or real estate. Without their own income to report or a need to open a bank account, these asset-holding entities did not need to obtain an EIN.

Under the BOI rules, there are no exceptions for companies, like these, used only to hold assets to not have an EIN. Their beneficial owners still must be disclosed and accompanied by a tax identification number on the BOI report.

The reporting company exemption for Inactive Entities would not help in this scenario. To qualify for that exemption and avoid needing to file an initial BOI report, the entity must not hold any type of foreign or domestic assets. Any assets such as a small amount of cash, equipment or stock in another corporation, which includes any art, airplanes and real estate, held by a reporting company cause it to fail the Inactive Entity exemption test.

Getting an EIN

If your asset-holding company does not have a tax identification number, you should work to obtain one as soon as possible. You can obtain an EIN by completing the application online, by telephone, by fax or by mail. Each of these methods is free of charge from the IRS. If you need an EIN quickly, applying online would be your best method, as it generates an EIN immediately. The other options take between four and five weeks.

Certain barriers make it more difficult to obtain an EIN quickly. The IRS limits all requests for an EIN to one per day per person applying for it. If your U.S. managing partner, for example, and apply online for an EIN using your social security number as part of the application, then the IRS webpage would prevent you from applying for another until the next day. Also, taxpayers outside the United States without a principal place of business domestically cannot use the online option, and must instead fax or mail in their requests. As a result, a foreign business must wait longer to obtain its EIN than a domestic company.

This lag time creates additional concern for foreign reporting companies formed in 2024 and especially for companies formed in 2025 and after. Newly incorporated or registered reporting companies in 2024 have 90 days to file the initial BOI report, and reporting companies formed in 2025 will have 30 days. 

This means obtaining an EIN for BOI reporting will need to be a priority as a part of the formation due diligence process.

If you have additional questions or concerns about how the CTA impacts your business, contact a Moore Doeren Mayhew advisor today.