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Volume XI, Number 212

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Real Estate Investors Beware - Corporate Transparency Act to Require Disclosure of Beneficial Ownership

In Congress’s effort to combat the financing of terrorism, money laundering, and other illicit activity, the recently passed Corporation Transparency Act (the “CTA”) will require business entities to report their beneficial ownership to the Financial Crimes Enforcement Network ("FinCEN"). The CTA was enacted as a part of the National Defense Authorization Act for Fiscal Year 2021.

The CTA is far-reaching and will have a significant impact on many business entities, particularly those with estate holdings. Real estate investments are often held in layers of numerous and varying entities for tax planning, syndicating ownership, liability protection, privacy concerns, and many other legal and practical considerations. Under the CTA, the beneficial owners of these entities will be required to be disclosed to FinCEN. A beneficial owner is any entity or individual who directly or indirectly exercises substantial control over the entity or owns not less than 25% of the entity. This is a low bar.

The CTA may also affect lenders in requiring the expansion of know-your-customer provisions and disclosure if the lender becomes the beneficial owner of an entity by exercising a right under a security interest.

The CTA leaves many questions unanswered, and the Secretary of the Treasury is required to promulgate regulations within one year of the enactment of the CTA – by January 2, 2022. Fortunately, the CTA provisions will not become effective until these regulations are issued; nevertheless, it is not too early to begin planning for its implementation. 

© Steptoe & Johnson PLLC. All Rights Reserved.National Law Review, Volume XI, Number 50
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About this Author

Charles Russell Real Estate Attorney Steptoe Johnson Law Firm
Associate

When clients work with Charlie Russell, they appreciate that he looks beyond the transaction at hand and understands the bigger picture for their business, as well as the community. Charlie feels great pride when a new building emerges from the ground in north central West Virginia, and he can say “I helped with that!”  As a business lawyer, Charlie works side by side with property developers, banks, business owners, and community leaders to make things happen.  Because of this, his legal practice has a broad scope, which makes him extremely valuable to clients.  He is skilled in drafting...

304-598-8152
Edward Rice Financial Attorney Steotoe Johnson Law Firm
Member

Ed Rice views legal issues and challenges from the client perspective, and understands that the ultimate purpose of all legal work is to meet client business objectives. Ed’s insights on client service come from his significant and diverse in-house counsel experience, including stints as General Counsel to a cutting edge fintech company in Montana, senior level legal positions in large banking institutions, and his many years in private practice counselling a diverse portfolio of financial services, fintech, technology and industrial clients. Ed’s clients view him as their partner and an...

412-504-8054
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