公司透明度法 | 法律午餐字节 | 第9集

welcom to the Legal Lunch Byte you were a frequent guest on our our predecessor to this which we called Global law in business this is a much more free flowing open discussion we’re keeping it to 15 minutes and today we are going to talk about the corporate transparency act which is everyone’s favorite topic so excited so please introduce yourself to folks who don’t know you you and I worked together for years now a very good complimentary partnership with a lot of international clients and corporate transparency is certainly applicable to all of them plus uh basically all of our clients so please introduce yourself for everyone and then we’ll we’ll jump in and and hit some of these questions we’ve got absolutely so I’m Michael Criddle I’m a tax partner with Eide Bailly in Utah I have been doing International tax for 25 years and it’s something I’m passionate about and I’m excited to have a guest appearance on the legal lunch bite you’re the only lawyer or you’re the only accountant I know who has put passion and tax in the same sentence ever ever excellent it is a great it is a great combination of traits so let’s talk about the corporate transparency act why do we even have this act yeah it’s interesting you know for years the US has kind of resisted uh the pressure from Europe specifically to enhance and strengthen something called kyc or know your clients um and and who fundamentally is the beneficial owner of corporate structures they they want us to understand and know who is behind all of these corporate structures and businesses being set up in the US and so a law was passed in 2021 that finally created this new reporting uh regime so that uh companies set up in the US would have to report the ultimate owners of their businesses because that’s fundamentally what the government wants to know who is pulling the strings behind the screen well the inter it’s interesting to me because I always felt like especially as I dove into the crypto world the last few years I always assumed that the US was the one beating the drum and maybe that is the case because there’s so many you know everyone’s tied to the US Financial system or if you want to be then the US can can bring the hammer down and say You country we are blacklisting you or gray listing you uh because you don’t comply with with our uh you you are not making sure that disreputable people are using our financial system or having access to the US financial markets so it’s very interesting to me coming in I I guess as an outsider I always feel like an outsider in every industry because I’m a lot of times I’m learning as I go um it’s just interesting that the US is now finally getting compliant with what I assumed it was requiring of all the other established countries absolutely yeah the US is a little bit of a do what we say don’t necessarily barely do what we do makes perfect sense so fundamentally um tell uh tell me I know this a bit but I like it from your perspective because you and I see the same thing and we see it from different angles which is absolutely uh good to do together so uh who does this ultimately apply to is is it everyone is is it some is it only foreign companies you know who should be concerned about this yeah so this is very broad now it uh spefic specifically targets us corporations and us llc’s so it’s businesses that are structured as corporations and llc’s but the vast majority of businesses even ones that are taxed as Partnerships or S Corps or something else disregarded entities are legally structured as llc’s so any entity structured as an LLC or a corporation in the United States is subject to these reporting rules uh with some exceptions uh there’s 26 of them I think but uh there’s a number of exceptions um but they’re very narrowly defined and so you really need uh you know a professional that kind of help you navigate whether or not you qualify for one of these exceptions yeah and I consider those kind of the companies and entities who are already beholden to public you reporting in some way they’re already for instance banks financial companies listed companies they already have significant government oversight so this is going to bring a broad net to everyone else agreed yeah and there’s some pretty strict deadlines Jonathan so um you know for companies that and this covers even companies that have been in existence for 20 years 10 years because uh any LLC or us corporation that was in existence before January 1st 2024 still has to do this beneficial ownership reporting uh they just have until January 1st 2025 to do the reporting uh it’s particularly onerous for new companies though because any new companies established in 2024 have 90 days to comply uh with this foreign or this uh beneficial ownership reporting and any companies established after January 1st 2025 so in the 2025 calendar year will only have 30 days to comply with the beneficial ownership reporting I know as you and I were talking about this earlier this week there are companies that don’t even get a tax ID number in 30 days from the IRS if there’s some hangup if they fax in the form or it doesn’t go through it’s entirely possible they don’t they don’t have a tax ID number at the point of time where they have to register with FinCEN that’s absolutely the case and it’s and it’s going to actually necessitate in my mind that there’s going to be you know some advanced work done from a beneficial ownership reporting perspective before the company even goes live yeah I know we have a a it’s a PDF a multi-page PDF that we send to all of our International clients and domestic clients asking them for not significant not all the beneficial ownership reporting information but most of it and so we’re going to have to cast a wider net as we’ve been forming entities the last six weeks since the New Year it’s something that I’ve had to think about consciously and how are we going to modify our forms to make sure that it’s easy for us that that the administrative burden is not on me it’s still on our clients to provide us something the information because as you know it’s difficult getting information from us companies but International companies I know you and I know I mean it’s it can be it can be sketchy unreliable you’re always kind of wondering are you are you getting all the right information um have you thought a little bit about how to um you know is your is I Bailey taking this on as a a responsibility or are you pushing this down to the clients to make sure they comply yeah so um a lot of accounting firms including I Bailey in discussions with our uh Insurance practice insurance have determined that this is just a risk we can’t take on it’s uh the other element is the AICPA which is the governing body of accountants has come out and said there’s some question as to whether or not this is providing legal advice and in the United States accountants cannot provide legal advice they don’t let me play in Jonathan sand box sadly not a pretty you don’t want to be here yeah so we have to be really careful that we don’t take on this responsibility um but we absolutely can and will help our clients comply with it but for complex ownership structures it can take some effort to figure out who ultimately is the beneficial owner who either owns or controls uh the company and that is an interesting Nuance that maybe a lot of people don’t think about you know the the immediate thought is okay who are The Beneficial owners what are the what are the threshold percentages for ownership that we have to keep an eye on how far up the ownership chain you have to go if you have a chain of entities and and ultimately who is uh you who is in control which I think is this is an interesting concept that Maps over pretty well to cfus that’s the committee on foreign investment in the US so anytime a foreign company there are some Safe Harbor countries that these companies could come from but basically anytime a foreign company is looking at acquiring a controlling interest in a US company they have to do a at least a cfus analysis analysis if not a cfus review and that’s a body that that is it’s conglomerate made up of um kind of the who’s who of the executive branches in determining mostly for national security purposes who we want to buy or who we’re okay with buying existing companies so it’s analogous not identical overlap a bit of a vend diagram in terms of who uh the cfus net would bring in but I’ve been through some cfus actions and that beneficial ownership reporting goes all the way down to every individual no matter what and so it’s it’s even a deeper more penetrating look at the entity that would be acquiring a controlling interest in US entity as compared to the corporate transparency act yeah and really the corporate transparency Act is also concerned about individuals so it’s individuals that control underlying corporations or indiv uals that you know control us entities both from a domestic and international perspective it just can be trickier from an international perspective tracing through complex structures to determine who the ultimate owners are and then obtaining the necessary documentation from those owners in order to comply with the beneficial ownership reporting my sorry go ahead I was just going to say it’s not as simple as just typing in their name you have to prove who they are right and uh and that means uh passport or other US Government photo ID with an unique identifying number that the US government can then put into the database you know knowing that not everyone has a passport right so I think it’s interesting uh the sheer volume I know I don’t I feel like IRS is overwhelmed I got to imagine the treasury is going to be overwhelmed with this especially these first couple of years I can’t imagine that they’re going to be able to stay on top of the I don’t know many millions of companies are going to be reporting this year and certainly next year when the when all the you know pre 2024 entities have to make their filings it’s it’s a little bit mind-boggling and I know you and I are a little bit we’re a little bit skeptical on on whether or not that 30-day deadline is going to be enforceable enforced or enforceable in 2025 and Beyond no I agree and really this is going to be new for a lot of people because disregarded entities so llc’s that are set up with a single owner and are disregarded for tax purposes have up to this point had no like you know reporting requirements they just kind of exist for legal purposes um but those entities will have to do beneficial ownership reporting with FinCEN and that’s going to be new and unique for them because they won’t they won’t be those kind of llc’s won’t be accustomed to disclosing this kind of information yeah I’m thinking about all the you know trades people who were solo I mean us has such a huge number of small and medium-sized Enterprises yeah it’s going to bring a lot of companies into that net for sure a lot of owners that aren’t aren’t ready for it aren’t thinking about it yeah and most of them are llc’s limited liability companies in the US which are subject to this reporting um and then truss are another interesting piece um you know a lot of LC are yeah Sor I talk over you you said llc’s and corporations earlier so so how do how do the trust fit in well trust can be um trust can be unique because they have beneficial owners of trust fundamentally right you have beneficiaries you have grantors you have settlers um and so the US is trying to look through or these rules are trying to look through trust at the ultimate owners but the existence of trust in your ownership structure can make determining who’s the beneficial owner who has control much more challenging from a beneficial ownership report in perspective what is the largest string of entities that you have ever seen in your practice oh probably about probably about 15 or 20 I don’t know that is disgusting it it is disgusting it’s true and the other thing to keep in mind is some trusts that are categorized as business trusts or treated as corporations could actually be reportable entities Under The Beneficial ownership or corporate trans transparency act rules even though they’re not technically an LLC or a corporation so it’s an interesting Nuance that folks are gonna have to kind of work through in the back of my head I’m you know the vast majority of entities that I form are llc’s and corporations but uh you’re right that every you know as the lawyer I’m thinking I’ve got to check every entity against that list and see if it if it fits the criteria for this yeah especially as we’re as we’re forming them so Mike uh when do you and I go to jail for this that’s the that’s the big question right who goes who goes to jail and how much is it going to cost to get out of jail well you know we really don’t know right they they talk about $10,000 penalties for failure to file does that mean that they assess them automatically after the 30 days has lapsed you just get a letter in the mail saying you didn’t report your entity within 30 days here’s a $10,000 penalty is it more targeted than that meaning do they just have this penalty in their back pocket and they pull it out when they see a bad actor we just don’t know it’s so new it will be very interesting to see how FinCEN enforces this penalty if it’s anything like fbars which is foreign bank account reporting which is also under FinCEN it’s more of a when they come across a bad actor they have this penalty in their back pocket that they can assess but it isn’t automatically assessed for late filing or failure to file unless there’s a compelling reason to assess it I think the key word that I saw is Will so all of you’re right it’s going after Bad actors and I did see a 90-day grace period in addition of like for instance this this year we have 90 days to file and then 90 days after notice as a grace period so I think as long as and it’ll be interesting to see how that’s applied if it’s equally appli or how that works but as long as there’s no um you know we’re not willfully none of us as as the filers my Law Firm the filers uh helping companies do this or the companies themselves or someone who provides me bad information there’s a lot of you know seeing willfully willfully willfully throughout the the regs and the q&as is is a little bit of comfort for me although like you said it’ll be you know time will tell how far how far this goes agreed yeah it’s new okay so we’re we’re at our 15 minutes Mike you have any parting thoughts before we let everyone go it’s going quickly and always appreciate chance to catch catch up with you well just um you know this is another example of casting a wide net so that they can weed out a few bad actors and unfortunately this is something we have to comply with so make sure you’re on top of it make sure you’re talking to your trusted business advisers your your lawyers and accountants and whoever uh to help you navigate this uh because it could be a real trap for the unwary if you’re not careful agreed so next week we will be talking about internet fraud a couple of my colleagues who specializing that uh will be probably sharing some some gory details about some of the uh some of the bad situations they’ve seen of dealing with internet fraud it usually never turns out well but it’s good for everyone to be aware of what’s going on especially now that crypto is on the rise and everyone thinks they’ve their their magic money has turned into more magic money yeah thanks Mike it’s great to chat with you it’s great to chat with you too Jonathan that sounds like a really interesting topic always I’ll tune in