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The Corporate Transparency Act: Navigating the Latest Updates

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Arm yourself with the most up-to-date information about the Corporate Transparency Act (CTA) and its requirements by joining a 75-minute webinar that will include a discussion of what our team has learned since the CTA was implemented on January 1, a review of the CTA regulation, as well as updates on reporting obligations. The webinar will conclude with a Q&A session with our presenters.

Specific topics will include:

  • New information regarding reporting, corrections, and update obligations

  • Review of CTA-related terms and concepts, e.g., reporting company, company applicant, substantial control, etc.

  • Recent Financial Crimes Enforcement Network (FinCEN) updates

  • CSC’s Beneficial Ownership Information (BOI) filing service and related solutions

Webinar transcript

Disclaimer: Please be advised that this recorded webinar has been edited from its original format, which may have included a product demo. To set up a live demo or to request more information, please complete the form to the right. Or if you are currently not on CSC Global, there is a link to the website in the description of this video. Thank you.

Caitlin: Hello, everyone, and welcome to today's webinar, "The Corporate Transparency Act: Navigating the Latest Updates." My name is Caitlin Alaburda, and I will be your moderator.

Joining us today are two of CSC's experts Alli Gerhart, Vice President of International Compliance and Governance, to provide an update on the Corporate Transparency Act, and David Jefferis, Senior Director of Project (sic) Management for Global Compliance, to speak to how CSC can help with our new CTA Beneficial Owner Information Filing service.

And with that, let's welcome Alli and David.

David: Awesome. Thank you so much. We want to start by saying thank you to everyone in our audience for joining us today. We've had just an outpouring of interest in this topic, and so we're really excited to take everyone through the content that we have prepared for today. So with that in mind, why don't I jump in and describe what we'll cover by looking at the agenda?

So we're going to start with a bit of a primer, kind of an overview of the Corporate Transparency Act, and there's definitely some vocabulary and vernacular to maybe acquaint yourself with. So we're going to talk about entities that are obligated under this regulation to file with FinCEN, the governing body, which those are reporting companies. We'll talk about entities that might meet exemptions and therefore not need to file. Alli has put together some awesome structure charts that can kind of take us through some very specific scenarios to understand again whether or not entities that are of a similar nature might, in fact, meet some of these exemptions.

We'll talk about the company applicant provision in terms of what that entails in terms of what would need to be reported to FinCEN. We'll talk critically about beneficial owners, which really are at the heart of this regulation, understanding who owns and controls companies. We'll get into those definitions certainly in much more detail. And then we'll also talk about report contents and timing, so what information actually does need to be provided for entities that are obligated to report and what are the kind of the clocks or the time frames which do vary based on a couple of parameters that we'll also discuss.

We're a few months into the year, so we're also going to talk a bit about what's new, what we've learned since the CTA has gone into effect. And then where I'll come back into the conversation is more towards the tail end, where we'll talk about CSC's Beneficial Ownership Filing service and also some technology that we can bring to the table to effectively assist organizations that have this filing obligation.

And then, certainly, there's a Q&A widget, which we encourage you to utilize throughout the presentation. We'll try to make sure that we have a little bit of time saved at the tail end to address some of the questions that we get as well.

Alli: Great, thanks, David. And good afternoon, everyone. Thanks so much for joining us. As this is an update webinar, before diving into the specifics, I wanted to address the latest piece of news, and I see we're already getting tons of questions about it. It's an issue so hot off the press we don't even have a separate slide.

On Friday last week, the U.S. District Court for the Northern District of Alabama issued an opinion finding the CTA unconstitutional. The court found that the CTA exceeds the Constitution's limit of legislative authority because the CTA cannot be justified as an exercise of Congress' enumerated powers. The law is unconstitutional.

I won't get into the details of this decision. But you might be wondering in light of this ruling, is the CTA something we all still need to be concerned about? I think the answer is still yes for three reasons.

The first, the government is certain to appeal this ruling. Although the appellate process can grind slowly, this is highly unlikely to be the last word on constitutionality. Should the decision be overturned, we all need to be prepared.

Second, the immediate impact of this ruling is actually really narrow. It grants relief to these specific plaintiffs, so long as the court's order remains in effect that is, but it does not impact other entities or businesses not party to the case. In other words, everyone else still needs to comply.

And third, understood in a kind of global and historical context, demand for comprehensive beneficial ownership legislation in the U.S. has been building for a long time. Even if the CTA is discarded or substantially amended, it represents the clear direction of travel right now, and it's worth thinking through how those obligations will likely impact businesses and their owners going forward.

So what is the CTA? Broadly speaking, it obligates reporting companies to report certain information about their company applicants and beneficial owners. Therefore, to apply the CTA correctly, you need to understand those three key terms — reporting company, company applicant, and beneficial owner. I actually like to think about these terms in that order because it kind of goes by the level of abstraction. For most entities and in most structures, it's going to be pretty clear whether your company is a reporting company. But it might be a little bit more ambiguous with respect to the beneficial ownership analysis. So we'll talk about how those can come together.

But in general, a reporting company is a domestic corporation, LLC, or similar entity, or a foreign company registered to do business in the U.S. unless an exemption applies. A company applicant is the filing party. The term refers to the person who files the company formation document with the registry and, if different, the person that directed the filing. Beneficial owners are the company's ultimate owners and significant controllers. But we'll dig into each of these terms more thoroughly in the coming slides.

The term "reporting company" is defined in Section 5336(a)(11) of the CTA. It means a corporation, limited liability company, or similar entity that is created by filing a document with the secretary of state or similar office of a state or American Indian tribe, or formed under the law of a foreign country and registered to do business in the U.S. by filing a document in the same manner. However, what constitutes a similar entity was left for FinCEN to decide.

So far, FinCEN has declined to further define what constitutes a similar entity or provide a list of similar entity types. A similar entity is generally understood to mean an entity that was formed by the filing of a document with the secretary of state or similar office of the appropriate filing jurisdiction. Given the variety of formation practices and terminology used in different jurisdictions, FinCEN believes it would be difficult to create a list that would be applicable to every situation.

Not surprisingly, these ambiguities have raised a few questions, and FinCEN has issued a few helpful responses. So what about companies created or registered in a U.S. territory? Technically, the CTA mentions only companies created or registered with an office of a state or Indian tribe. FinCEN has recently updated its FAQs to indicate that these are reporting companies as well, unless an exemption applies. In the same response, FinCEN also clarifies that companies created or registered in the District of Columbia are also reporting companies.

So what about sole proprietorships or general partnerships? Typically, these would not be considered reporting companies because in most circumstances these entities are not created or registered through the filing of a document with the secretary of state or similar office. Moreover, in cases where a sole proprietorship or a general partnership registers for a business license or similar permit, this type of registration does not create the entity, so this does not fall within the reporting company definition. However, registration and filing practices may vary by jurisdiction, so this might not be true in 100% of all cases.

But what about trusts? Here, there's significantly more variability. FinCEN has clarified that a trust is only a reporting company if it was created by the filing of a document with the secretary of state or similar office, or in the case of a foreign entity registered to do business in the same manner. Jurisdictions differ considerably over how different types of trusts are created or registered, so a clean yes or no here is really not going to be possible.

Reporting company exemptions. So even if an entity meets the foregoing definition of a reporting company, you must next consider whether it meets any of the 23 exemptions. If an exemption applies, the entity is not a reporting company and does not need to file a BOI report with FinCEN.

The vast majority of exemptions apply to regulated companies, such as financial institutions, SEC-regulated companies, public utilities, and insurance companies. The exemptions are specified by reference to definitions contained in particular laws, such as the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, the Commodities Exchange Act, and others. If these apply to your business, you're likely already very familiar with these laws, so it's not worthwhile to spend a lot of time discussing them here.

However, there are three exemptions that are more broadly applicable —the large company exemption, the subsidiary of exempt company exemption, and the inactive entity exemption. We'll look at each of these in more detail and consider some scenarios.

So the large operating company exemption. For large, private, unregulated corporates, this exemption is absolutely key. There are three elements of this exemption, all of which must be satisfied for the exemption to apply.

First, the company must have 20 or more employees. The CTA did not define what constitutes an employee, but the final rule adopts the IRS standard, which provides that a full-time employee is one who averages 30 hours per week or 130 hours per month. Those 20 employees must also be employed in the U.S. and must be employed by the entity itself, not aggregated across the corporate group. This lack of aggregation is a bit of a trap for the unwary, and it certainly surprised me initially as I considered how this exemption might apply to CSC. Commentary to the proposed rule suggested that FinCEN broaden the rule to allow for consolidated employee headcount, but FinCEN expressly declined.

Second, the company must have $5 million in gross receipts or sales from U.S. income. That amount must be reported on the company's federal income tax or information return for the previous year, excluding amounts from sources outside the U.S. Helpfully, where the company is part of a consolidated group, it is sufficient for the $5 million to be met by the group collectively rather than the entity individually. In other words, entities may be consolidated for purposes of meeting that $5 million requirement, but not for the purposes of meeting the 20 employee headcount requirement.

Third, the company must have an operating presence at a physical office within the U.S. This has been defined to mean a physical location where the entity regularly conducts its business. The location must be owned or leased by the entity and must be physically distinct from the place of business of any other unaffiliated entities.

Subsidiary of exempt companies exemption. This is another critical exemption for larger corporate structures. The exemption applies to an entity whose ownership interests are controlled or wholly owned, directly or indirectly, by certain types of exempt entities. This is a fairly simple rule to apply. There's no multi-element test. But there are a few key things to be aware of.

First, notice the emphasis on wholly-owned entities. Entities that are only partially owned by an exempt entity, or is a parent company of exempt entity do not qualify for this exemption. This was a deliberate decision by FinCEN. In their view, to expand the definition to these types of entities would be effectively creating a new exemption, which they declined to do.

Second, the exemption does not apply to subsidiaries of all exempt entities. The vast majority of exemptions do qualify for this subsidiary exemption, but there are four that do not. Those are listed here on the slide. The thing to know is that if your parent company is relying on one of these four exemptions, its wholly-owned subsidiaries cannot utilize the subsidiary exemption. In that case, the subsidiary will be a reporting company unless some other exemption applies to that subsidiary.

The inactive company exemption. I frankly consider this to be the exemption of last resort. This exemption has six elements, all of which must be satisfied for the exemption to apply. In my view, several of these elements contain a bit of uncomfortable ambiguity, and a change in circumstance could very quickly disqualify an entity, thereby requiring an updated BOI report. The six elements are listed here.

The first element is pretty clear. The entity must have been in existence on or before January 1st, 2020. The second element, the entity was not engaged in active business, is a little more ambiguous. Some commenters question whether winding up activities could be considered active business. FinCEN declined to create specific rules, reasoning that would there was too much variability in state practices, and more specific examples would still leave much confusion for those situations where FinCEN had not created specific guidance.

The third element, no foreign ownership, should also be fairly simple to apply. The rule covers both direct or indirect and whole or partial ownership.

The fourth element, no change in ownership in the preceding 12 months, was also flagged by some commenters to be somewhat ambiguous. Does a change in ownership apply to direct or indirect, whole or partial ownership, like the previous element? In the commentary to the final rule, FinCEN states and I quote: "With respect to the meaning of any change in ownership, FinCEN believes the proposed regulation is sufficiently clear. It would cover any and all changes in an entity's ownership."

The fifth element requires that the entity has not sent or received any funds in an amount greater than $1,000, either directly or through any financial account in which the entity or an affiliate had an interest in the preceding 12-month period. Commenters thought the $1,000 limit was too low and suggested raising it to $3,000 to account for annual expenses, such as state franchise taxes, registered agents, domain registration, attorney and accounting fees, etc. FinCEN declined.

The sixth element requires that the entity does not otherwise hold any kind or type of asset, including any ownership interest in any entity. Commenters urged FinCEN to clarify that the exemption would apply even if an entity had a bank account or owned certain incidental assets, such as IP rights or website domains. Here again, FinCEN declined.

I mention the commentary here because in my role as in-house counsel, I see entities in our structure that for all practical purposes have ceased doing business. However, getting rid of these historic entities can be a real challenge. Sometimes entities can be around for so long that an organization no longer really knows whether it has any assets, or if it's even serving any purpose at all anymore. But getting rid of these entities makes executives nervous. It's the known unknown. What might we break that we don't know of just yet? But it's that same uncertainty that makes it hard to confidently rely on this exemption. So again, really it's the exemption of last resort, in my opinion.

So putting these three exemptions together, here's a really simple example. Large company is exempt under the large company exemption. It has direct and indirect wholly-owned subsidiaries who are all exempt under the subsidiary of exempt company exemption. And if your company structure looks like this, then there's no need to rely on any other exemption. The application is quite clear.

But switching the example just slightly, what if there is a JV partner? In this example, LC sub 1 and its subsidiaries, LC sub 2 and LC sub 3 are still wholly owned by large company, so they can rely on the subsidiary exemption. However, JV sub A and JV sub B are only partially owned by large company. They will need to inquire about the status of JV partner unless they independently qualify for some other exemption. However, we know that because JV sub A owns 100% of JV sub B, JV sub A will not qualify for the inactive company exemption. Here, we would need more information about JV partner, JV sub A, and JV sub B to determine whether any of these are reporting companies.

Final example, switching it again slightly, here we have a wholly-owned corporate structure, but the entity qualifying for the large company exemption is not the ultimate parent. This can easily happen when, like here, the main operating company, large company is held by a holding company with no employees of its own. Perhaps the enterprise also has a few subsidiary companies owned by the holding company rather than the large company.

The key to understand in this example is that neither the large company exemption, the subsidiary exemption, or the inactive company exemption apply to HoldCo. Assuming HoldCo is a corporation or another entity created by a filing with a secretary of state and no other exemption applies to HoldCo, HoldCo will be a reporting company. Further, assuming the same facts are true about HC sub A and HC sub B, these entities will also be reporting companies. They cannot rely on the subsidiary exemption since they are not in the direct chain of ownership of large company.

So once you determine that you have a reporting company, the next key concept is the company applicant. Before you burn too many calories trying to determine who the company applicant is, I recommend first considering whether this is something you even need to care about for your particular reporting company.

For this question, the key date is January 1st, 2024, the day the CTA came into effect. For domestic reporting companies created before 01/01/24 and foreign reporting companies registered to do business in the U.S. before 01/01/24, you do not need to report a company applicant. This is extremely helpful, and it was a deliberate policy decision. For companies that have been in existence for a long time, it may not even be possible to determine who the company applicant was at the time it was formed. For reporting companies created on or after 01/01/24, you had notice of this requirement and the opportunity to collect the appropriate information. So the company applicant will be required.

So if you've determined that you do need to report the company applicant, you next need to determine who that is. For companies created or registered after 01/01/24, there must be at least one but no more than two company applicants. The company applicants must be individuals, not legal entities or organizations. There are two types of company applicants, the direct filer, the individual who directly files the document that creates or registers the company, and if more than one person is involved in that filing, the second company applicant is the individual who is primarily responsible for directing or controlling the filing.

We'll talk more about updates to BOI reports shortly, but for now it's helpful to know that once the company applicant information has been reported, there's no need to update this information if any of the company applicant's personal data later changes.

Most companies are created or registered through their registered agent, like CSC. For CSC customers utilizing our filing service, a CSC employee will be a company applicant. We'll be able to provide the company with the employee's name and FinCEN identifier in order to complete any necessary BOI filing.

The question of who is primarily responsible for the filing can be a bit more ambiguous. It's easy to envision a scenario where there are more than two people involved, but there can only be a maximum of two company applicants. So you have to make a judgment call about who is primarily responsible.

In my organization, that person is generally going to be me as the attorney in charge of our corporate governance. I do not personally file the incorporation document, but I do coordinate with the business leaders to understand their needs, and I draft the filings and I give instructions to our service team to complete the filing on our behalf.

I've spoken to several law firms who are taking the position that the attorney in charge of the matter is also a company applicant. Again, this is a judgment call based on the particular facts and circumstances of your involvement.

Finally, every reporting company must report at least one beneficial owner. There is no maximum number of possible beneficial owners. Beneficial owners are always individuals, and there are two types — first, individuals who directly or indirectly own or control at least 25% of the ownership interests of the reporting company, and individuals who exercise substantial control over the reporting company.

Reporting companies are required to report all individuals who own at least 25% of the ownership interests and all individuals who exercise substantial control over the reporting company. So what is an ownership interest? Under the CTA, an ownership interest is very broad, and it includes equity, stock, or voting rights, capital or profit interests, convertible instruments, options or other non-binding privileges to buy or sell any of the foregoing, or catchall, any other instrument, contract, or other mechanism used to establish ownership. A 25% or greater interest in any of these items makes an individual a beneficial owner under the ownership test.

So what does it mean to have substantial control over a reporting company? Again, the test is very broad and includes any individual meeting any of four general criteria: a senior officer of the company, such as a president, CEO, CFO, COO, general counsel, or other officer, regardless of title, who performs a function similar to those officers; authority to appoint or remove certain officers or a majority of directors; an individual that directs, determines, or has substantial influence over important decisions; or another catchall has any other form of substantial control. Given all of these different ways to become a beneficial owner, this definition could potentially include a lot of people. Depending on the company's ownership control structure, there may be some ambiguity.

To illustrate the analysis, FinCEN provides a few scenarios in its written guidance. The most complex example is listed here for a reporting company that is a corporation with multiple indirect owners through Company Y and Company Z. In this example, Individuals A, B, C, and F are all beneficial owners. Individual A is the CFO, Individual C is the CEO and president, and Individual F does not have an official title, but we're told he does direct important decisions. These individuals all meet the substantial control test.

Individual B owns 70% of Company Y's 50% interest in the reporting company. Individual B's indirect ownership interests can be calculated by multiplying 50% times 70% for a total interest of 35%. Therefore Individual B is also a beneficial owner because his indirect ownership interest in the reporting company exceeds 25%. Individuals D and E only own 25% of Company Z's 50% interest, for a total interest of only 12.5% each. Absent any other facts indicating any other form of ownership or control, we would conclude that Individuals D and E are not beneficial owners.

Although we have already determined that Individual A is a beneficial owner under the control test, it's also worth noting that he is also a beneficial owner under the ownership test. He owns 30% of Company Y's 50%, which equals 15%, but he also owns 25% of Company Z's 50%, which equals 12.5%. Therefore, his total indirect ownership interest in the reporting company is 15% plus 12.5%, or 27.5%.

For purposes of filing a BOI report, it's not necessary to specify how exactly someone qualifies as a beneficial owner. I just include that information here to illustrate.

So the prior example was the most complex example available in FinCEN's guidance. In my opinion, though, that was still a pretty simple example that fails to take into account a number of more complex scenarios. To try to address some of those situations, I invented a new scenario shown here. So bear with me because typically when giving a presentation like this, a presenter should demonstrate their mastery of the subject matter by offering clear and definitive answers. Here's where I depart from this tried-and-true strategy. There is some ambiguity in this structure, and I still think it's useful as a discussion point to figure out where those points of ambiguity still lie.

So in this scenario we have two reporting companies, Company 2, which is a corporation wholly owned by Company 1. Company 1 is also a corporation with two types of ownership interests — voting rights and equity interests. The voting rights are shared in equal thirds by Individual A, who is also a director of Company 1 and Company 2, a trust in which Individual B serves as trustee and sole beneficiary, another trust in which bank serves as trustee, and five separate individuals who are beneficiaries. The equity interests in Company 1 are split between three individuals — Individual C, who owns 60%, and each of his two children, Individuals D and E, both with 20%.

In addition to the ownership interests, Companies 1 and 2 have a 10-person board of directors, a separate CEO, CFO, and founder. So considering the substantial control test first, the CEO, CFO are considered senior officers and will likely be considered beneficial owners. The founder, though, is still unclear. He does not have an official title that qualifies him as a senior officer, but he could remain very influential within the company. So we would have to know more about his involvement to make a determination.

With respect to the board of directors, clearly the board as a body makes significant decisions affecting the company. But does that mean that all 10 directors are considered to have that influence individually? Not necessarily and FinCEN makes that clear in their FAQs. A member of a reporting company's board of directors is not always a beneficial owner. Whether a particular director meets the beneficial owner criteria must be considered on a director by director basis. Therefore, we need more facts about founder and each of the directors to make a determination.

Moving to the ownership test, both voting rights and equity interests are a form of ownership interest under the CTA. So we need to look at the respective percentages of both.

Among the equity interest holders, clearly Individual C is a beneficial owner since he holds 60%. His children, D and E only have 20%. But does it matter that they're all related? Under the CTA, it does not matter. What's yours is yours, and there's no requirement to aggregate interests held by family members or close associates. Therefore, absent any other form of control, Individuals D and E are not beneficial owners.

Among the voting rights holders, Individual A is clearly a beneficial owner because he holds 33.33% personally. He's also a director, so we now know that at least we'll have 1 of the 10 directors listed on the BOI report.

The second voting shareholder is a trust, so we'll need to look through the trust structure. I'm assuming the settlor is now deceased and there are no other individuals or entities who own or control the trust in any way. So Individual B as trustee and beneficial owner is effectively the controller of this trust and would therefore be a beneficial owner of these companies.

The third voting shareholder is also a trust but with a more complex structure. Neither the final rule nor the FinCEN guidance has much information on the treatment of trusts. The final reporting rule at Section 1010.380(d)(2)(c) provides as follows. An individual may directly or indirectly own or control an ownership interest of a reporting company through any contract, arrangement, understanding, relationship, or otherwise, including with respect to a trust, (1) a trustee of the trust or other individual with the authority to dispose of trust assets, (2) as a beneficiary who is the sole permissible recipient of income and principal from the trust, or has the right to demand a distribution of or withdraw substantially all of the assets of the trust, or (3) as a grantor or settler who has the right to revoke the trust or otherwise withdraw the assets of the trust.

Here, we have a trustee that is itself another entity, not an individual. However, the trustee is also a bank, which indicates that it may itself be an exempt entity under the CTA. More on that in the next slide. We also have several beneficiaries, not a sole permissible recipient, and no indication of whether any individual has the right to demand a distribution or withdraw the assets of the trust. Therefore, we'll need a bit more information about the beneficiaries to make a determination.

I want to mention two special reporting rules relevant to the previous example. First, a reporting company that is partially held through one or more exempt entities need not report the beneficial owners of the exempt entity. Instead it can simply report the name of the exempt entity. In the prior example, assuming the bank is an exempt entity, the reporting companies may simply list the name of the bank rather than investigate and list the beneficial owners of the bank in its BOI report.

Second, a reporting company may report another entity's FinCEN identifier and full legal name in place of information about its beneficial owners when three conditions are met. One, the other entity obtains a FinCEN identifier and provides it to the reporting company. Two, the beneficial owners hold interests in the reporting company through ownership interests in the other entity. And three, the beneficial owners of the reporting company and the other entity are the exact same individuals.

In the previous example, and I'll pull that up here, there are potentially a lot of different beneficial owners, which means a lot of updates if and when their information changes. In order to reduce that burden, Reporting Company 1 can apply for a FinCEN identifier and provide it to Reporting Company 2. The beneficial owners of both reporting companies are the exact same, and the beneficial owners hold their interest in Company 2 through their interests in Company 1. Therefore Company 2 can simply file a BOI report that contains the name of Company 1 and Company 1's FinCEN identifier.

So report contents and timing. Once you've determined that an entity is a reporting company and have determined its company applicants and beneficial owners, you'll need to file the appropriate information with FinCEN. There are five pieces of information required for each reporting company: full legal name of the reporting company; all trade names, fictitious names, or DBAs, regardless of whether the name is registered; street address of the company's principal place of business; jurisdiction of formation; an IRS tax identification number, called a TIN.

Commenters raised a number of issues with the TIN requirement, suggesting alternative information that could be used in its place. FinCEN acknowledged that although there may be some situations in which a reporting company will not have a TIN, the vast majority will have one or will be easily able to obtain one. For domestic companies, online applications for a TIN are returned almost immediately.

There may be situations in which a foreign company that registers in the United States is not subject to U.S. corporate income tax and has no reason to obtain a TIN. In such cases, a reporting company may provide a foreign tax identification number and the name of the relevant jurisdiction as an alternative. In the event that unusual situations arise in which a foreign reporting company is not able to obtain a foreign tax identification number, FinCEN will consider appropriate guidance or relief depending on the circumstances.

For each beneficial owner and company applicant, the reporting company must file the full legal name of the individual, the date of birth for the individual, residential street address, noting that the company applicant can report a business address under certain circumstances, a unique identifying number from certain government documents issued to the individual, and an image of the document containing the unique identifying number that also includes a photograph of that individual. Acceptable documents containing the unique identifying numbers are non-expired passports, driver's licenses, and other state, local, or tribal identification documents.

For privacy reasons, some company applicants and beneficial owners may not wish to share their personal data with the reporting company. The CTA offers an alternative reporting option called a FinCEN identifier. The process to obtain a FinCEN identifier is very quick and can be done online. The individual will simply submit all of their own personal data to FinCEN and receive an identification number. The individual can then share that number with the reporting company in lieu of their personal data. The reporting company then submits the individual's name and FinCEN identifier rather than the other fields in the BOI report. An entity may also obtain a FinCEN identifier, either when it submits its first BOI report or anytime thereafter.

Although the FinCEN identifier is helpful for protecting personal information, there are a couple of limitations and concerns you should be aware of. First, an individual or reporting company may only obtain one FinCEN identifier. This makes sense of course, but someone could easily forget or lose that number. The biggest concern, however, is that the issuance of a FinCEN identifier places the holder under a lifelong obligation to file an update within 30 days after any of the application information changes. Failure to do so is a reporting violation subject to civil and criminal penalties. This is concerning, but the obligation still exists even if the individual no longer has any interest in or relationship to a reporting company in the future. FinCEN is aware of this burden and is looking at options that might possibly allow for deactivation, but so far there's no further word on this point.

Finally, when must the reporting company comply with these filing obligations? The answer depends on when the domestic reporting company was first created, or when the foreign company was first registered to do business in the U.S.

For companies created or registered before 01/01/24, you must file the BOI report by 01/01/25. For companies created or registered during the 2024 calendar year, you must file the BOI report within 90 days of creation or registration. For companies formed or registered on or after 01/01/25, the reporting deadline shortens to 30 calendar days of creation or registration. The calendar day deadline runs from the earlier of the date that the company receives actual notice of its creation or registration, or the date that a secretary of state or similar office first provides public notice of the company's creation or registration.

In addition to filing the initial BOI report, reporting companies are obligated to keep that information current. BOI reports must be updated within 30 calendar days of any change to reported information. There are two notable exceptions. There's no requirement to report a company's termination or dissolution, and there's no requirement to file an updated report for any changes to personal information of a company applicant. Additionally, if an inaccuracy is detected in a previously filed BOI report, the company must file a corrected report no later than 30 calendar days after the date the company becomes aware of the inaccuracy or had reason to know it.

What we've learned since the Corporate Transparency Act went into effect. There's not been much in the way of new substantive guidance for filers since the CTA came into effect at the beginning of this year. We can report that the filing portal called the Beneficial Ownership Secure System or BOSS is now up and running. Approximately 475,000 filings were made in January, but it's not clear how many of those filings were for newly formed entities or existing entities.

The system has generally been reliable. The most common issue is attaching identity documentation because the system cannot handle very large file sizes, but FinCEN is working on that.

For filers looking for information, communication with FinCEN continues to be a challenge. FinCEN has a rudimentary chatbot, but no live chat or operational call center so far. In January alone, FinCEN received 20,000 questions, and responses have been very slow.

We hope for more substantive guidance to resolve some of the ambiguities we discussed today. But in the meantime, FinCEN's top priorities for this year include spreading the word about BOI reporting requirements and available resources, finalizing the access rules for state, local, and tribal law enforcement, and updating the customer due diligence rule for financial institutions. Incidentally, I'm sure one of their priorities now is also appealing this recent decision from the district court.

And finally, FinCEN published one additional guidance note in February. It's intended for small financial institutions to explain their duties and obligations regarding access to and permitted use of BOI. It's less relevant to filers. But to the extent you have concerns about the security and access rights to this information, this is a short, six-page document that may be able to answer some of your questions.

David: CSC's Beneficial Ownership Filing service. And so whereas the regulation itself is in many cases convoluted and ambiguous and sort of challenging to understand, I would argue that our filing service is quite the opposite. It's actually very straightforward. And so I get to talk to clients really day in and day out about it, and I think it's rather straightforward in terms of our offering. So I'm excited to take folks through it.

First and foremost, this is a filing service. I'll talk about that being a little bit of a distinction where this is not necessarily a technology play. This is really more leaning into our ability to prepare and file reports on behalf of our clients that have this filing obligation. And so really the first bullet there is that we are providing a means to securely transmit this information that's required for the filings to CSC so that we can do the actual preparation filing of the beneficial ownership reports with FinCEN.

The second bullet that you're seeing there is an optional element of the service. So we have some organizations that will identify who their beneficial owners and/or company applicants are, but then they either don't necessarily have the time to devote to doing the outreach and nagging and corralling of all the information they need to gather for those individuals, or maybe they know going into it that there's going to be quite a lot of what we call PII, or personally identifiable information that they need to collect, and maybe they don't really feel comfortable that they have technology within their enterprise where they're comfortable with sort of storing that information that is necessary for these filings. And so an optional element of the service is effectively engaging CSC not just to prepare and file the beneficial ownership report with FinCEN, but to actually reach out to identified individuals to gather what is needed to actually submit those filings to FinCEN. And that outreach could be direct to an individual, or it could be to an authorized individual. So, for example, maybe don't reach out directly to Jane Doe, but reach out to her assistant, who will gather this information for you. So again, we can do that outreach on an as-needed basis if that's a level of engagement that's helpful to our clients.

At the heart of this offering, again, is preparing and filing the Beneficial Ownership reports with FinCEN through the Beneficial Ownership Secure System website, which is up and running as of January 1st of the year. And then also as a part of the service, we're delivering what I would describe as a confirmation on filing evidence documents so that you're not sort of taking our word for it. But within our technology platform, you can see absolutely that on this day for this entity, this filing was completed and accepted to know that you're kind of in compliance, in the clear so to speak with that reporting obligation.

Now the focus for most of the folks that we speak with today is on what we call initial filings, where again it's an entity that unfortunately doesn't meet any of the exemptions. It's obligated to report, so the focus or hyperfocus right now is on submitting those initial filings. And as Alli talked to earlier, the timing is kind of all over the map, right? If we're talking about entities that were in existence before 2024, you actually have all of this year in which to submit those initial filings. If we're talking about entities formed in 2024, you have 90 days in which to have that filing submitted. And then, unless FinCEN changes their mind, which they potentially could do, as we get into 2025 and entities formed in 2025 going forward, that 90-day clock is actually going to shrink down to 30 days. And so that's something to certainly be aware of.

And so, again, we're able to assist not just with initial filings, but you'll see in the next bullet we can also support corrected filings. So if it comes to your attention that some of the information you provided was inaccurate for whatever reason, we can submit a corrected filing on your behalf. We also can handle what are largely referred to as amended filings. So maybe you didn't get it wrong the first go-around, but maybe something has changed. Maybe information about a reporting company has changed. Maybe it's gone through a legal name change, or it's got a new DBA. Maybe something about beneficial owners have changed in terms of maybe who they are or information about them has changed. So we absolutely can support amended filings.

And then there's also the concept which I chatted about with a few folks in the Q&A, this concept of a newly exempt filing. So one of the questions we got quite a bit was, "Hey, if my entity is exempt, do I need to do a filing?" And thankfully, the answer is no, you don't have to inform FinCEN that your entity meets one of those 23 exemptions. But if you do the upfront analysis and initially it doesn't meet an exemption, and so you do or have CSC perform an initial filing on your behalf, but then circumstances change, maybe it didn't meet the employee or revenue threshold counts for that large company exemption initially, but now it does, CSC could submit what's called a newly exempt filing to let FinCEN know that going forward this entity is no longer one of the entities that we're going to be providing updates regarding.

Now in terms of the filing service, what I'd mention really the analogy that I often draw with folks is that really in my mind there's kind of a parallel to our Annual Report Preparation and Filing service, which is a very popular service where clients are saying, "CSC get this off of my plate. I want to give you the information, and I'll let you deal with the heavy lifting of actually preparing and filing annual reports on our behalf." And this service is very much sort of in that model, and a key value proposition really is letting you focus on your business, focus on your key objectives and strategic directives, and not deal with the headache of the actual preparation and filing of these documents with FinCEN.

Now while CSC, because we're not a law firm, isn't going to offer determinative legal guidance on whether or not an entity is exempt or if it needs to report, we're not going to weigh in on who is or isn't a beneficial owner, we certainly do provide clarity in terms of the information that we require to file these reports on your behalf, which is a little bit of a segue into the next area of the slide, which talks about the means by which you can provide information to CSC. So effectively there are multiple I'll call them standard options. We'll talk on the next slide about some custom opportunities.

But really the standard options are we have a smart form on the CSC Global website, so not on the sort of world-facing website. It's after you log in. So if you're an existing CSC client, you can go to the website, provide your username and password, log in to what we call the CSC dashboard, and there's the CTA Beneficial Ownership form. You can click on it, and it prompts you for all the relevant information about the reporting company, about beneficial owners, and again, if we're talking about entities formed this year, company applicant information. And you can fill out that information and submit, and that kicks it off to our Order Fulfillment team that actually takes over the preparation and filing of that report with FinCEN.

Or alternatively, if you prefer, we have a structured spreadsheet, which we can send out to anyone who's interested, where effectively you can provide the information in an Excel template, in a very structured, organized fashion, send that to a dedicated distribution list. And again, that goes right to our CTA Order Fulfillment team to handle that on your behalf.

Now if it turns out that you do obtain FinCEN identifiers across the board for your beneficial owners and/or company applicants, you can provide all the information in the smart form, you can provide all the data in the Excel file, and you are good to go. We have what we need to do the filings on your behalf. If you do not have FinCEN IDs across the board and there is going to be personally identifiable information, like legal name of the beneficial owner, their address, their birth date, an ID document like a passport or driver's license, for example, what we'll do is have you fill out the smart form or fill out the spreadsheet minus the personally identifiable information, and then we'll automatically reach out to you with a secure link to a data room to more securely collect that personal information, that we'll then compile into the filing that gets submitted to FinCEN.

One of the things that I do want to mention about this service is that you really do get to work with the dedicated team of CTA experts. And so CSC as an organization has been around for 125 years. We're very proud of the anniversary that we're now celebrating. And really we've been in the business of handling transactional filings for clients since day one. That's really kind of in our DNA.

And also what I would mention is that even though the CTA is new and it's certainly nuanced, prior to the go-live of the CTA, CSC was already offering UBO or Ultimate Beneficial Ownership Filing services in over a dozen countries. So really the framework, sort of the work involved in handling filings, the work involved in collecting and compiling information in a secure fashion is not foreign to us at all. It's really in our wheelhouse. It's something that we're very, very familiar with, so we're able to hit the ground running with this end-to-end filing service for our clients.

So that's sort of the standard offering. On the next slide, we'll talk a little bit about bulk projects and potentially what we call custom-tailored solutions.

So a bulk project is really a situation that we've run into with a number of our clients, where they've done some of that upfront legal analysis and unfortunately for them they have dozens or in some cases hundreds of entities that don't meet any exemptions, therefore they are reporting companies. And so what we're able to do is work hand-in-hand with them to put together a pricing that's reflective of the volume of filings that they're engaging CSC to perform. So for those larger projects, we absolutely can introduce volume discounts to the pricing involved for the filings.

Now with our solution, there's a fee for filing. There is a fee if you want to optionally engage us to do outreach to collect information on beneficial owners and company applicants. And that's really it. Those are really the fees that are typically involved.

Having said that, we have had some organizations that have come to us with unique needs. We're in active conversations with multiple law firms and corporate clients, where they want to perhaps sort of initiate orders in a different fashion, or they might have very specific workflow needs in terms of where the invoice goes or where the order evidence goes. And so we're absolutely happy to kind of deviate from our standard workflow. We would just want to sit down with you, have a conversation, kind of understand those needs, and put together a contract and pricing that would be in relation to the needs that you have that might sort of deviate slightly or in a fair amount from kind of our standard offering that we have.

Now what I'll mention is that in the space, I kind of alluded to this before, a lot of our competitors are focusing on just purely technology, where effectively you're paying them a subscription fee for access to a technology portal. You are, in some cases, also paying them for the privilege of submitting those filings to FinCEN. And so really all the work is still on your shoulders. We're sort of going in the opposite direction, which is let's get this off your plate for a filing fee.

Having said that, there is optional technology that we can bring to the table. So I try to be as clear about this as possible. You can spend zero dollars on technology with us and still have CSC do the filings for a filing fee. However, there are organizations that have a larger volume of entities and reporting companies, where they really would benefit from a technology solution to help them track the underlying information that's relevant to FinCEN for these reporting companies.

And so that comes in the form of CSC Entity Management. It's an award-winning entity management solution that's been on the market for over a decade. It can do a tremendous number of things. What this slide attempts to do is to sort of focus on some of its applications towards the CTA specifically. And so within the technology, and by the way any entities where CSC is the agent flow automatically into this solution, you can go ahead and mark entities as reporting companies versus exempt, so that you can sort of get your arms around the entities that do have this filing obligation.

You can very easily within our Officers and Directors Modules track the appointments that you have. And based on some of the content that Alli covered earlier, we know that a lot of folks, almost by title alone, start to qualify themselves as beneficial owners under the lens of the CTA. So you can flag who those individuals are.

There's also a very robust Ownership Module within the technology that facilitates the generation of structure charts. Not only can you view that graphically or in a report, but we can do indirect ownership calculations, getting back to one of the examples also that Alli provided, where you've got an individual that might not directly own an underlying reporting company, but they may have multiple entities in between. It'll do that multi-level math to tell you what percentage of ownership that individual has in an indirect capacity to what could be an underlying reporting company.

And we did launch in mid-December last year, kind of getting ourselves and our clients ready for the CTA what we're calling a beneficial ownership visualization report that effectively aggregates the data. So here's all your reporting company information, here's the information on your appointments or ownership records, so that you have really the pieces of the puzzle in front of you so that you can start to make some of those critical connections in terms of individuals that may meet that FinCEN definition and need to be included in those FinCEN filings.

One last thing that I'll mention, before I think we kick it off into Q&A, is that in our role as registered agent, there's a fair amount of information that we have on file so to speak within our technology platform for clients, things like the names of these entities and where they're formed. If clients are also engaging us for filing doing business as names or renewing DBA names, that's information that we have on file. Also if you're using our Annual Report Preparation and Filing service, which I alluded to earlier, there's a good bet that we would have an EIN or similar tax ID as well as a principal place of business. And I mention all of this because that really starts to fill out the information that's needed for a reporting company. So for some of the clients that are looking to engage us for this Beneficial Ownership Filing service, we'll take our structured Excel template and actually stage it with all the information that we have on file for your reporting companies, and then you would sort of fill in the missing pieces in terms of who are the beneficial owners, company applicants.

Now whether we're staging data for you, or whether you're starting with a blank Excel and providing all the data to CSC, we do require that the individual that submits the order to CSC effectively attest to the fact that the information they're providing is true, correct, and complete. So we want to make sure that we're submitting accurate information to FinCEN, and so we're having our clients sort of sign off on that as a part of the filing submission.