Corporate Transparency Act: New Reporting Requirement for Beneficial Ownership Information

12.22.2023 Written by: Henningson & Snoxell, Ltd.

Starting January 1, 2024, numerous businesses in the United States will be required to disclose details under the Corporate Transparency Act (CTA) regarding their beneficial owners—those who ultimately have ownership or exert control over the company. This information must be submitted to the Financial Crimes Enforcement Network (FinCEN), which operates as a bureau within the U.S. Department of the Treasury.

Does my company have to report?

The CTA mandates that corporations, limited liability companies, and similar entities must report if they are either: (i) established by filing with a Secretary of State or an equivalent office under State or Indian Tribe laws, or (ii) foreign entities registered to operate in the United States, except for certain exempt entities. Furthermore, most partnerships, including Limited Partnerships (LPs), Limited Liability Partnerships (LLPs), and Limited Liability Limited Partnerships (LLLPs), fall under the CTA’s reporting requirements, as they are typically formed through a state-level filing.

There are many exempt entities, including, but not limited to, public companies, banks, credit unions, tax-exempt entities, and large private companies.

What does my company need to report?

Beneficial owners of reporting companies will first need to be established based on the criteria set forth by FinCEN. Reporting companies will then need to disclose information about these individuals, such as name, date of birth, address, unique ID number, and image, as well as the entity’s name, address, formation jurisdiction and tax identifier.

For entities created or registered after January 1, 2024, there is an additional report needed for the “company applicant.” The company applicant is the individual who first files or registers the entity. Reporting companies established or registered before January 1, 2024, are not required to report information about their company applicants or update this information, as long as it was accurate when initially reported.

When should we report?

Starting January 1, 2024, FinCEN will begin accepting Beneficial Ownership Information (BOI) reports. The deadlines vary based on the company’s formation or registration date:

Companies created or registered before January 1, 2024, must submit their BOI by January 1, 2025.
Companies formed or registered between January 1, 2024, and December 31, 2024, need to report BOI within 90 days after the effective notice of their formation or registration.
For companies established or registered on or after January 1, 2025, BOI must be filed within 30 days following the effective notice of their creation or registration.
Any updates or corrections to previously filed beneficial ownership information should be reported to FinCEN within 30 days of the change.

What are penalties for non-compliance?

Willful failure to report or update ownership information, or providing false information, can lead to severe civil or criminal penalties, including daily fines or imprisonment. Senior officers may be held accountable for their company’s non-compliance. Penalties also apply for intentionally causing a company to fail in its reporting obligations or for providing false information. However, there is a safe harbor from penalties for voluntarily correcting inaccurate reports within 90 days of the original deadline.

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Please note, all information presented in this post is for general informational purposes only, and the content provided is a summary. Please contact our business attorneys to update your governing documents and contracts and for more information and guidance regarding the effect of the CTA on your operations.

Keeping the Peace during the Holidays

12.20.2023 Written by: Henningson & Snoxell, Ltd.

Holidays can be a difficult time for families. Gathering around the dinner table often brings stress, especially if there are concerns regarding money and aging parents. Well-meaning children may bring up ideas on how Mom and Dad can avoid “giving everything to the nursing home” by giving assets to the children. I urge families to proceed with caution. Planning for incapacity and long-term care should be a longer discussion with legal and financial professionals involved to ensure that aging loved ones are protected from unintended consequences.

Long-term care planning is a complex process dealing not only with tax consequences but also possible eligibility issues regarding financial assistance for long-term care. Generally speaking, Medical Assistance prohibits giving gifts of any amount within five years of application for assistance.

Let’s look at an example. Grandma gives each of her five grandchildren $10,000 for Christmas each year for four years. On the fifth year, she finds herself in need of long-term care but without sufficient assets, so she applies for Medical Assistance. Unless the $200,000 in gifts given to the grandkids over the past five years is returned to Grandma, she will be ineligible for Medical Assistance for nearly two years. This is called a penalty period. It is calculated by taking the amount of the gift and dividing it by the Statewide Average Payment for Skilled Nursing Facility (a/k/a SAPSNF). This number is updated every July based on the monthly average cost for care in a nursing home in Minnesota.

There are some options to protect or gift assets, but such strategies should be coordinated by an elder law attorney, the person’s financial advisor, and tax advisors. An elder law attorney who is well-versed in the rules regarding Medical Assistance can work with families to plan a legacy while ensuring that the long-term care needs of the elderly loved one are kept at the forefront.

Planning for Incapacity is also best accomplished with the aid of professionals. Handwritten powers of attorney and health care directives may be valid on their faces, but they can create significant headaches if there are questions regarding the individual’s capacity to execute such documents. This is especially true when concerns of financial exploitation arise. When a healthcare directive or power of attorney is called into question because of a person’s incapacity to execute new documents, the parties must go to court in a guardianship and/or conservatorship proceeding. These are expensive and oftentimes contentious proceedings costing tens of thousands of dollars and splitting families apart in the process.

If you think a family member might need to enter an assisted living or long-term care facility, pick the right time and place to discuss it. Many aging loved ones are fiercely protective of their independence and autonomy. Conversations regarding safety risks of remaining in the home need to be approached respectfully and carefully. This promotes a more productive conversation and a higher likelihood of finding solutions that balance safety concerns with our loved ones’ wishes. Proactive discussions and support can go a long way toward preventing a need for emergency interventions. Elder law attorneys can assist families with navigating tough conversations. They provide an objective outside perspective and practical knowledge of what the next phases of life might look like. At a time when a family may be overwhelmed and not quite sure what the future looks like, an elder law attorney can help you plot a course for the future while keeping the peace in the family.

Ban on Asking Applicants and Employees about Pay History

12.18.2023 Written by: Henningson & Snoxell, Ltd.

Effective January 1, 2024, all employers in Minnesota will be prohibited from asking job applicants, including contractors and current employees seeking internal promotions or transfers, about their pay history. Employers will need to base a salary offer on market conditions and the applicant’s skills, education, and other qualifications. However, job applicants may voluntarily disclose their pay history with a prospective employer. Employers should review applicant materials and communicate to applicants what information will be used in determining the salary offer.

MINNESOTA’S NEW EARNED SICK AND SAFE TIME LAW

12.13.2023 Written by: Henningson & Snoxell, Ltd.

Effective January 1, 2024, Minnesota’s Earned Sick and Safe Time (ESST) law will require employers with one or more employees to provide paid leave to all employees who work at least eighty (80) hours a year in the state of Minnesota to be used for one of the many permitted purposes specified in the statute.

What responsibilities do employers have?

Employers have the option to either allow employees to accrue ESST at a rate of one hour of paid leave for every 30 hours worked, up to at least 48 hours in a year (the “accrual method”) or use the “frontloading method” whereby the employer ensures that each employee has the requisite amount of ESST frontloaded by January 1, 2024.
Include the total number of ESST hours accrued and available for use; and the total number of ESST hours used on the employee’s earning statements at the end of each pay period.
Provide notice informing the employees about ESST.
Include an ESST notice in any employee handbook.

Under the Accrual Method, employers must allow employees to carry over accrued but unused ESST but may cap the total amount of accrued ESST at 80 hours.

Under the Frontload Method, an employer must frontload 48 or 80 hours depending upon whether they pay out unused ESST at the end of the year.

Policies that already provide paid time off will comply with the ESST law as long as they meet or exceed all necessary criteria and do not include conflicting provisions. It is not mandatory for the paid time off policy or plan to be explicitly labeled as ESST to fulfill the law’s requirements. However, employers may find it beneficial to incorporate references to ESST usage within their policy.

Please note, businesses in Bloomington, Duluth, Minneapolis, and St. Paul are already subject to sick and safe time ordinances. On January 1, 2024, employers will have to follow that which is most generous as it applies to their employees.

Contact us regarding implementation of the ESST law as well as necessary reviews and updates to employee handbooks. We are here to help protect you and your business.

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