The New Corporate Transparency Act: Tax and Wealth Management Considerations for Owners of Closely Held Corporations, LLCs, Partnerships and Other Entities and Creators, Trustees and Beneficiaries of Trusts
On April 20, 2021 by Schnader in TaxErica Howard-Potter published a client alert, “The New Corporate Transparency Act: Tax and Wealth Management Considerations for Owners of Closely Held Corporations, LLCs, Partnerships and Other Entities and Creators, Trustees and Beneficiaries of Trusts.”
The Corporate Transparency Act was enacted by Congress on January 1, 2021 as part of the National Defense Authorization Act, overriding then-President Trump’s earlier veto. The purpose of the Act, as its name suggests, is to collect information and lift the curtain on owners of corporations, limited liability companies (“LLCs”) and other entities in an effort to curb illegal activities such as money laundering, tax fraud, human and drug trafficking, financing terrorism and other serious crimes.
The Act will have a far-reaching impact. It is aimed primarily at reducing the United States’ vulnerability to “malign actors” who, for illegal purposes, may conceal their ownership or control of companies. However, in order to protect against illegal activity, a broad range of companies and individuals will be required by the Act to disclose and report identifying information. For example, the comprehensive scope of the Act raises questions about whether disclosure will be mandated for trusts owning interests in family limited partnerships, among other possible effects of the new law.
This article will provide an overview of the Act and focus on the potential effects on tax and wealth management clients and advisors.