Corporate Transparency Act's Impact on Real Estate: Reporting Companies; Exemptions; Beneficial Ownership Reporting

Description

Beginning Jan. 1, 2024, the CTA requires certain U.S. and foreign entities defined as "reporting companies" to report certain identifying information about themselves, their beneficial owners, and company applicants to FinCEN (the U.S. Dept. of the Treasury's Financial Crimes Enforcement Network) within a certain prescribed time period.

The CTA will likely impose a heavy burden on real estate businesses. Real estate is commonly owned by a special purpose entity (SPE) and ownership of the SPE is usually structured through a chain of additional entities. All of these may be considered reporting companies subject to the CTA's requirements unless they meet an exemption.

The CTA also adds a new layer of reporting requirements for lenders in real estate transactions who will need to reassess their AML protocols and real estate investors who will need to comply with the reporting requirements for their investment vehicles. Due diligence will become more complex.

Failure to comply with the new reporting requirements will result in serious civil and criminal penalties.

In addition to the CTA, real estate counsel should be aware of applicable state-level reporting requirements. Most notably, New York and Pennsylvania have enacted or are enacting laws with similar reporting requirements as the CTA and a California bill is under consideration.

Listen as our expert panel discusses the CTA's impact on real estate entities and transactions and how to determine whether exemptions apply. The panel will also address state laws with similar reporting requirements of which counsel should be aware. The panel will further describe best practices for compliance.