Is Your Business Exempt From Reporting Under the Corporate Transparency Act? (Checklist)

The attorneys at Williams Mullen have prepared a Corporate Transparency Act (Act or CTA) Exemption Checklist to help “legal entities,” including any domestic or foreign corporation, limited liability company, limited partnership, statutory business trust or other form of entity created by the filing of a document with a secretary of state or other similar office, determine whether they must comply with beneficial ownership reporting requirements under Act.

The Act and its implementing regulations include 23 specific exemptions. These exemptions (outlined below) mainly apply to larger U.S. entities or U.S. regulated entities.

YOU ARE EXEMPT FROM THE CTA IF YOU CAN CHECK ANY OF THE FOLLOWING BOXES:

A business concern that is an issuer of a class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 781) or that is required to file reports under section 15(d) of that Act (15 U.S.C. 78o(d));

A business concern constituted, sponsored, or chartered by a State or Indian Tribe, a political subdivision of a State or Indian Tribe, under an interstate compact between two or more States, by a department or agency of the United States, or under the laws of the United States;

A depository institution (as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813); 

A credit union (as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752); 

A bank holding company (as defined in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841)) or a savings and loan holding company (as defined in section 10(a) of the Home Owners’ Loan Act (12 U.S.C. 1467a(a));

A broker or dealer (as defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c)) that is registered under section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o); 

An exchange or clearing agency (as defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c)) that is registered under section 6 or 17A of the Securities Exchange Act of 1934 (15 U.S.C. 78f and 78q–1); 

An investment company (as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a–3)) or an investment adviser (as defined in section 202(11) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–2(11))), if the company or adviser is registered with the Securities and Exchange Commission, has filed an application for registration which has not been denied, under the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.) or the Investment Adviser Act of 1940 (15 U.S.C. 80b–1 et seq.), or is an investment adviser described under section 203(l) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–3(l)); 

An insurance company (as defined in section 2 of the Investment Company Act of 1940 (15 U.S.C. 80a–2); 

A registered entity (as defined in section 1a of the Commodity Exchange Act (7 U.S.C. 1a)), or a futures commission merchant, introducing broker, commodity pool operator, or commodity trading advisor (as defined in section 1a of the Commodity Exchange Act (7 U.S.C. 1a)) that is registered with the Commodity Futures Trading Commission; 

A public accounting firm registered in accordance with section 102 of the Sarbanes-Oxley Act (15 U.S.C. 7212) or an entity controlling, controlled by, or under common control of such a firm; 

A public utility that provides telecommunications service, electrical power, natural gas, or water and sewer services, within the United States;

A church, charity, nonprofit entity, or other organization that is described in section 501(c), 527, or 4947(a)(1) of the Internal Revenue Code of 1986, that has not been denied tax exempt status, and that has filed the most recently due annual information return with the Internal Revenue Service, if required to file such a return; 

A financial market utility designated by the Financial Stability Oversight Council under section 804 of the Dodd-Frank Wall Street Reform and Consumer Protection Act; 

An insurance producer (as defined in section 334 of the Gramm-Leach-Bliley Act); 

Any pooled investment vehicle that is operated or advised by a person described in clause (iii), (iv), (v), (vi), (viii), (ix), or (xi); 

Any business concern that satisfies all three of the following items:

1. employs more than 20 employees on a full-time basis in the United States;
2. files income tax returns in the United States demonstrating more than $5,000,000 in gross receipts or sales; and
3. has an operating presence at a physical office within the United States;
    

Any corporation or limited liability company formed and owned by an entity described in this clause (xviii) or in clause (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi), (xii), (xiii), (xiv), (xv), or (xvi).

One notable category of Exempt Entities is for “large operating companies.” A legal entity qualifies as a “large operating company” if it (a) employs more than 20 full-time employees in the U.S., (b) has filed a federal tax return or, if applicable, consolidated federal tax return recording more than $5 million in gross receipts or sales in the previous year and (c) has an operating presence at a physical office in the U.S.  Under the Final Rule. The direct and indirect wholly-owned subsidiaries of most Exempt Entities are themselves exempt.

However, any change in eligibility for the exemption (for example, a Large Operating Company dips below 20 employees or no longer has a physical presence in the United States), will, at a minimum, require the legal entity to again evaluate whether it is eligible for any other exemption.

This checklist contains general, condensed summaries of actual legal matters, regulations, and opinions for informational purposes. It is not meant to be and should not be construed as legal advice. Clients with particular questions on specific issues should contact an attorney at Williams Mullen.