Congress Enacts Corporate Transparency Act Requiring Corporations, Limited Liability Companies and Similar Entities to Disclose Beneficial Ownership Information

Key Points:

On January 1, the National Defense Authorization Act for Fiscal Year 2021 (the "Defense Bill") was enacted into law. This Defense Bill includes the Corporate Transparency Act (the "Act"), a revised version of legislation that was originally introduced to the House in 2019, requiring limited liability companies and corporations to disclose certain ownership information. The Defense Bill was vetoed by President Trump on December 23, 2020 after it was initially passed by Congress, but the US House of Representatives voted to override the presidential veto by a super majority margin of 322-87 on December 28, 2020, and the US Senate voted to override the presidential veto by a super majority margin of 81-13 on January 1. The Act requires that all corporations, limited liability companies and "other similar entities" that are formed within any US State (including the District of Columbia, and Puerto Rico and other US Territories), Indian tribe or foreign entities that are registered to do business in the United States (collectively, "Reporting Companies") disclose certain information regarding their beneficial owners. The reasoning behind President Trump's veto of the Bill was entirely unrelated to the Act.

Legislative Intent

The stated intent of the Act is to establish federal legislation for the collection of beneficial ownership information of Reporting Companies in order to "(A) set a clear, Federal standard for incorporation practices, (B) protect vital United States national security interests, (C) protect interstate and foreign commerce, (D) better enable critical national security, intelligence, and law enforcement efforts to counter money laundering, the financing of terrorism, and other illicit activity; and (E) bring the United States into compliance with international anti-money laundering and countering the financing of terrorism standards."

Key Requirements

Penalties for Non-Compliance/Safe Harbor

Effective Date

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National Law Review, Volumess XI, Number 4