Beneficial Ownership Information: FinCEN Clarifies the Treatment of Corporate Trustees

BACKGROUND

The federal Corporate Transparency Act (“CTA”) went into effect on January 1, 2024, and is intended to combat financial crimes, such as money laundering. Under the CTA, a company that qualifies as a “reporting company” is required to report certain information about its “beneficial owners” to the Financial Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Department of the Treasury.

There are various questions regarding application of the CTA, and FinCen recently provided a few answers through an update to its Beneficial Ownership Information Frequently Asked Questions (“BOI FAQ”). A key item included in the update was reporting of corporate trustees.

CORPORATE TRUSTEES

If a trust, which has a corporate trustee, has an ownership interest in a reporting company, the beneficial owners of the corporate trustee may have to be disclosed. Whether the beneficial owners of the corporate trustee must be disclosed generally depends on the ownership or operating structure of the corporate trustee in relation to the reporting company.

A beneficial owner is an individual who either: (1) directly or indirectly exercises substantial control over a reporting company; and/or (2) controls at least 25% of the reporting company’s ownership interests. Regarding the second form of beneficial ownership, a trustee is considered to control the ownership interests of a reporting company owned through the trust if the trustee has the authority to dispose of the trust assets.

EXEMPTIONS

The reporting company may report just the name of the corporate trustee if certain conditions are satisfied, which are summarized below:

The corporate trustee is exempt from the reporting requirements of the CTA.
The control of the reporting company’s ownership interests by the beneficial owner of the corporate trustee is limited to such beneficial owner’s control of the corporate trustee.
The beneficial owner of the corporate trustee does not individually exercise substantial control over the reporting company.

The full BOI FAQ can be found here: Beneficial Ownership Information Frequently Asked Questions.

The attorneys at Dvorak Law Group continue to monitor guidance and legal authority concerning the CTA and are ready to advise you on the CTA and whether your business is subject to its reporting requirements.