Audiology Practices Impacted by the Corporate Transparency Act

Audiology Practices Impacted by the Corporate Transparency Act

Brandon Pauley, Esq.

The Beneficial Ownership Information Rule was adopted as part of the Corporate Transparency Act passed by Congress in 2021 and intended to help prevent and combat money laundering, terrorist financing, corruption, and tax fraud.

Effective January 1, 2024, the Beneficial Ownership Information (BOI) Rule requires small businesses across the United States to report personal information about owners, beneficial owners, and others who own or exercise control over the company. Visit the Financial Crimes Enforcement Network (Fin- CEN) BOI site here: www.fincen.gov/boi.

Who Must Report?

All domestic and foreign corporations, limited liability companies (LLCs), or other entities created by the filing of a document with the Secretary of State or similar office in the United States must file, unless it qualifies for one of the several enumerated exemptions identified in the Rule.

A business required to file (a “reporting company”) will need to include certain specified personal information concerning:

  • The business itself.
  • Any owners holding 25% or more of the stock, voting rights, or ownership interests in the company.
  • Any other individuals (such as senior officers or other important decision makers), whether or not they are owners, who exercise substantial control over the company’s finances, structure, or business operations.
  • Individuals who filed, or directed the filing, of the organizing documents that created or registered the company (for entities formed after 1/1/2024).

The personal information for any individual required to be disclosed includes the individuals full name and address, date of birth, and other identifying information such as a passport number, driver’s license number, etc.

Broadly, 23 various exemptions exist, but mostly apply to entities already subject to some other reporting requirements. For example, banks, publicly traded companies and/or public utilities are exempt. There is no exemption that squarely applies to independent audiology practices.

Timing to Report.

As the intent of the legislation is to gain information from small businesses, those businesses existing on January 1, 2024, will have one (1) year to comply. Any businesses formed after January 1, 2024, will need to disclose and file the beneficial owner information within thirty (30) days of the entities formation. In addition, any changes in the information disclosed must be updated within thirty (30) days.

Penalties for Failure to Comply.

A failure to report complete or updated information to FinCEN, or an attempt to provide false or fraudulent information, may result in civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two (2) years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required report may be held accountable for that failure.

Recent Developments - Challenges

It is worth noting challenges to the enforceability of the Corporate Transparency Act. On March 1, 2024, a federal district court in the Northern District of Alabama concluded that the Corporate Transparency Act (“CTA”) exceeded Congressional powers and enjoined the Department of the Treasury from enforcing the CTA against the plaintiffs. National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.). On March 11, 2024, the U.S. Department of Justice appealed the district court’s decision to the Eleventh Circuit Court of Appeals. That case is currently pending.

In a March 11, 2024 statement, the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) specified that the district court’s decision enjoined enforcement of the CTA with respect to the plaintiffs of the litigation detailed above. However, aside from these named plaintiffs, FinCEN specifically provides that “reporting companies are still required to comply with the law and file beneficial ownership reports.” Thus, the potential for associated fines and penalties may still be enforceable while the appeals process plays out, but it is unclear.

How to Comply?

If you determine you have a reporting obligation, the information is reported to, and maintained by FinCEN as part of the Beneficial Ownership Information Rule. FinCEN is a bureau of the U.S. Department of the Treasury. Per the above, it is unclear whether the CTA remains enforceable. Despite the developments, most resources suggest filing to ensure timely compliance in the event the law is upheld as enforceable.

If you have questions or concerns regarding the CTA and/or steps to comply, please contact a knowledgeable attorney to provide relevant guidance. ■