Who Is Exempt from the Corporate Transparency Act?

While the Corporate Transparency Act (CTA) imposes broad reporting requirements on many entities, certain organizations are exempt from these obligations.

In this article, we’ll outline which entities are exempt from the CTA’s reporting requirements and the specific criteria that qualify them for exemption.

Overview of Exempt Entities

The Corporate Transparency Act (CTA) specifies several entities exempt from reporting beneficial ownership information. These exemptions apply to organizations with significant regulatory oversight, such as financial institutions. They also include entities with a low risk of involvement in illicit activities, like certain non-profit organizations.

Exempt Categories

• Publicly Traded Companies: Companies registered with the Securities and Exchange Commission (SEC) and are publicly traded on a U.S. stock exchange are exempt from CTA reporting requirements. These companies are already disclosing substantial ownership information under SEC regulations.
• Banks and Credit Unions: Financial institutions, including banks, credit unions, and bank holding companies, are exempt from CTA filing because they are regulated by federal banking agencies and are already subject to strict regulatory requirements regarding ownership disclosure.
• Governmental Entities: Federal, state, and local government entities, as well as entities wholly owned by these governments, are exempt from CTA reporting.
• Large Operating Companies: Companies that meet the following criteria are also exempt:

1. More than 20 full-time employees in the U.S.
2. Gross receipts or sales exceeding $5 million annually, as reported on the previous year’s tax return
3. A physical office in the U.S.

• Inactive Entities: Entities that have existed for more than 12 months, have no assets and are not engaged in any active business are exempt from CTA reporting.
• Regulated Entities: Entities already subject to extensive federal or state regulation, such as insurance companies, registered investment companies, and public accounting firms, may also be exempt from CTA reporting.
• Nonprofit Organizations: Certain nonprofit organizations, particularly those with tax-exempt status under Section 501(c)(3) of the Internal Revenue Code, may be exempt from CTA reporting.

Special Cases and Considerations

• Subsidiaries of Exempt Entities: Subsidiaries fully owned by an exempt entity, such as a publicly traded company, are generally exempt from reporting requirements.
• Foreign Entities: Foreign entities are not exempt solely because they have a “foreign status.” However, they may qualify for exemption if they fall under one of the above mentioned exempt categories.

Conclusion

Understanding whether your entity is exempt from the Corporate Transparency Act’s reporting requirements is crucial for ensuring compliance. By identifying the exemption categories and assessing your entity’s status, you can determine whether you need to file a CTA report or if you qualify for an exemption.