Much has been said about the Corporate Transparency Act (the “CTA”), a significant piece of legislation enacted by Congress at the dawn of this year. The primary aim of CTA, as codified in 31 USC 5301, et seq., is to deal with the disclosure of corporate ownership and the prevention of money laundering and financing of terrorism. A noble objective, one might say. But this also raises key considerations for associations nationwide.
Since this law took effect on January 1, 2021, there is growing apprehension amongst corporates and associations alike. Let us first look at this from a corporate perspective. The core issue stems from the possibility of having to provide corporate ownership information leading to potential sanctions including, but not limited to, financial penalties for non-disclosure. When applied in the corporate world, such requirements could prompt corporations to disclose information to the U.S. government, which they may otherwise prefer to keep private.
Now, let’s focus on how this plays out for associations. Several of these entities may fall under the reporting requirements of the CTA. This means that if they fail to comply with these requirements, they could face a $10,000 fine. While this will have the desired effect of promoting transparency in the association sector, the costs of compliance could be punitive for some organizations.
To be fully prepared, it is important for each corporate body and association to understand the specifics about their obligations under the CTA. One must remember that complete knowledge equips one to navigate such issues more effectively, mitigating risks of heavy penalties. Therefore, awareness, comprehension, and appropriate implementation of the CTA are increasingly becoming of paramount importance.
You may want to delve deeper into this subject with the help of the piece on “Corporate Transparency Act – Does Your Association Want to Give the U.S. Government $10,000” by Husch Blackwell LLP.
The CTA represents a significant shift in how corporate ownership is disclosed in the United States. It might be a wake-up call for associations and corporates to scrutinize their operations more minutely and ensure their compliance with a rapidly evolving regulatory landscape.