The Corporate Transparency Act kicks in this year and creates a reporting requirement that many farmers may not know about. Michael Pittman, Executive Director of the National Agricultural Law Center, talks about the new law on the books.
“One I would add would be the Corporate Transparency Act. That is going to be a huge one in 2024. It’s a federal law that’s a mechanism for helping detect and prevent criminal money laundering and various types of fraud. and it requires business entities – particularly LLCs – to go through a reporting process. That reporting process is not terribly difficult. I’m not gonna say it super simple, but it’s not like they’re asking for your shoe size and a lot of personal information.”
The requirement means disclosing information about the beneficial owners of the entities, including single-owner LLCs. Pittman says it’s not just for agriculture.
“You will go through a process. It applies to everybody. When I say everybody, I mean ag and non-ag. It kicks in this year, and so far, every audience we’ve talked to is completely surprised to hear about it. We began throwing it in some presentations last year, and the real kicker is that it does have penalties, including criminal penalties inside of it. Now, it may be unlikely that a criminal action will be brought in most circumstances, but that is on the books. It is something to be aware of. A lot of these operations may be a general partnership with LLCs underneath it, and people may have more than one business entity and so forth, so this is something that people are going to need to know.”
The new requirement is expected to impact at least 32.6 million entities. He says the strange thing is no one appears to be telling business owners about the new requirement.
“The real underlying kicker here is that it looks like it’s nobody’s job to tell anybody this thing is out there. It’s not something people intuitively know about. Attorneys who do estate planning might not be aware of this. It’s something more likely that these operations might need to go to their attorney, or attorneys that learn about it might need to mail all their clients and say, ‘Hey, this is something that we’re gonna need to do.’ CPAs, same thing. They may not necessarily know about this reporting, but they need to do it. Different Secretary of State’s offices, or whatever name they go by, they need to know more about it where they put it on their website, for example and give notice to people that there’s a filing requirement that’s going to follow the business filing. That’s a big one.”
More information is available at nationalaglawcenter.org.