The Corporate Transparency Act (“CTA”) was enacted January 1, 2021, as part of the National Defense Authorization Act, representing the most significant reformation of the Bank Secrecy Act and related anti–money laundering rules since the U.S. Patriot Act. The CTA is intended to address and guard against money laundering, terrorism financing, and other forms of illegal financing by mandating certain entities (primarily small and medium size businesses) to report “beneficial owner” information to the Financial Crimes Enforcement Network (“FinCEN”).

The CTA authorizes FinCEN, a bureau of the U.S. Treasury Department, to collect, protect, and disclose this information to authorized governmental authorities and to financial institutions in certain circumstances.

Our firm is sending you this communication to provide you with some general information regarding the new reporting rules, as well as initial steps you should take to address the implications of the CTA to your organization.

We strongly encourage you to reach out as soon as possible to legal counsel with expertise in this area to assist your organization with the steps you need to take to ensure compliance with the CTA, if applicable.

What entities are subject to the new CTA reporting requirements?

Entities required to comply with the CTA (“Reporting Companies”) include corporations, limited liability companies (LLCs), and other types of companies that are created by a filing with a Secretary of State (“SOS”) or equivalent official. The CTA also applies to non-U.S. companies that register to do business in the U.S. through a filing with an SOS or equivalent official. Since the definition of a domestic entity under the CTA is extremely broad, additional entity types could be subject to CTA reporting requirements based on individual state law formation practices.

There are a number of exceptions to who is required to file under the CTA. Many of the exceptions are entities already regulated by federal or state governments, and as such already disclose their beneficial ownership information to governmental authorities.

Another notable exception is for “large operating companies” defined as companies that meet all the following requirements:

· Employ at least 20 full-time employees in the U.S.

· Gross revenue (or sales) over $5 million on the prior year’s tax return

· An operating presence at a physical office in the U.S.

Who is considered a “beneficial owner” of a Reporting Company?

A beneficial owner is any individual who, directly or indirectly, exercises “substantial control” or owns or controls at least 25% of the company’s ownership interests.

An individual exercises “substantial control” if the individual (i) serves as a senior officer of the company; (ii) has authority over the appointment or removal of any senior officer or a majority of the board; or (iii) directs, determines, or has substantial influence over important decisions made by the Reporting Company. Thus, senior officers and other individuals with control over the company are beneficial owners under the CTA, even if they have no equity interest in the company.

In addition, individuals may exercise control directly or indirectly, through board representation, ownership, rights associated with financing arrangements, or control over intermediary entities that separately or collectively exercise substantial control.

CTA regulations provide a much more expansive definition of “substantial control” than in the traditional tax sense, so many companies may need to seek legal guidance to ultimately determine who are deemed beneficial owners within their organization.

Phase-in of reporting requirements

As currently promulgated, the CTA’s reporting requirements will be phased-in in two stages:

· All new Reporting Companies — those formed (or, in the case of non-U.S. companies, registered) on or after January 1, 2024 — must report required information within 90¹ days after their formation or registration.

· All existing Reporting Companies — those formed or registered before January 1, 2024 — must report required information no later than January 1, 2025.

How to prepare for the CTA

With the CTA introducing a new and expansive reporting regime, now is the time to assess the new rules’ implications on your organization. Some questions and comments for your company to consider now, although not meant to be all-inclusive, include:

· Is your company subject to the CTA, or do you qualify for any of the exemptions?

· If your company is not exempt, how should you calculate percentages of “ownership interests” to determine whether any owners meet the 25%-ownership threshold? In many companies with simple capital structures, the answer will be obvious. It may be much less obvious, however, for companies with complicated capital structures (given the expansive definition of “ownership interest”), or companies in which some ownership interests are held indirectly — for example, through upper-tier investment entities, holding companies, or trusts.

· How do you assess and determine each person who exercises “substantial control” over the company? There may well be multiple people who qualify, given the expansiveness (and vagueness) of the “substantial control” definition.

¹ FinCEN issued a final rule on November 29, 2023, extending the deadline for companies created or registered in 2024 to file initial beneficial ownership information (BOI) reports to 90 calendar days after their formation or registration (was originally 30 days).

· What new processes and procedures should the company put in place to monitor future changes in its beneficial owners and reportable changes on existing beneficial owners that will require timely updated reports to FinCEN? Note that the types of information that must be provided to FinCEN (and kept current) for these beneficial owners include the owner’s legal name, residential address, date of birth, and unique identifier number from a non-expired passport, driver’s license, or state identification card (including an image of the unique-identifier documentation). A word of caution, this is going to be a trap for Reporting Companies, as you will need to rely on beneficial owners to timely update you on reportable changes to their information (e.g., ownership changes, moves, marriages, divorces, etc.). As a result, a company’s operative documents may need to be revised to include provisions related to the CTA such as representations, covenants, indemnifications, and consent clauses. For example, the operating agreement may require:

· A representation by each shareholder, member or partner, as applicable, that it will be in compliance with or exempt from the CTA;

· A covenant by each shareholder, member or partner, as applicable, requiring continued compliance with and disclosure under the CTA or to provide evidence of exemption from its requirements;

· An indemnification by each shareholder, member or partner, as applicable, to the company and its other shareholders, members or partners, as applicable, for its failure to comply with the CTA or for providing false information; and

· A consent by each disclosing party for the company to disclose identifying information to FinCEN, to the extent required by law.

Take immediate action now!

As the CTA is not a part of the tax code, the assessment and application of many of the requirements set forth in the regulations, including but not limited to the determination of beneficial ownership interest, may necessitate the need for legal guidance and direction. As such, since we are not attorneys, our firm is not able to provide you with any legal determination whether an exemption applies to the nature of your entity or whether legal relationships constitute beneficial ownership.

Since the filing of the Beneficial Ownership Report is a legal matter, we will not provide services in the area. We strongly encourage you to reach out as soon as possible to legal counsel with expertise in this area to assist your organization with the steps you need to take to ensure compliance with the CTA, if applicable.

Note that penalties for willfully violating the CTA’s reporting requirements include (1) civil penalties of up to $591² per day that a violation is not remedied, (2) a criminal fine of up to $10,000, and/or (3) imprisonment of up to two years.

² The penalties for BOI reporting violations have been inflation adjusted and are increased to $591 a day from $500, effective January 25, 2024.

For additional information regarding the beneficial ownership reporting requirements under the CTA, refer to FinCEN’s Frequently Asked Questions document at https://www.fincen.gov/boi-faqs.

Sincerely,

Bishop, Farmer & Co., LLP

Close

The Financial Crimes Enforcement Network (FinCEN) has announced that the mandatory beneficial ownership information (BOI) reporting requirement under the Corporate Transparency Act (CTA) is back in effect. Because reporting companies may need additional time to comply with their BOI reporting obligations, FinCEN is generally extending the deadline 30 calendar days from February 19, 2025, for most companies.

FinCEN's announcement is based on the decision by the U.S. District Court for the Eastern District of Texas (Tyler Division) to stay its prior nationwide injunction order against the reporting requirement (Smith v. U.S. Department of the Treasury, DC Tex., 6:24-cv-00336, Feb. 17, 2025). This district court stayed its prior order, pending appeal, in light of the U.S. Supreme Court’s recent order to stay the nationwide injunction against the reporting requirement that had been ordered by a different federal district court in Texas (McHenry v. Texas Top Cop Shop, Inc., SCt, No. 24A653, Jan. 23, 2025).

Given this latest district court decision, the regulations implementing the BOI reporting requirements of the CTA are no longer stayed.

Updated Reporting Deadlines

Subject to any applicable court orders, BOI reporting is now mandatory, but FinCEN is providing additional time for companies to report:

For most reporting companies, the extended deadline to file an initial, updated, and/or corrected BOI report is now March 21, 2025. FinCEN expects to provide an update before that date of any further modification of the deadline, recognizing that reporting companies may need additional time to comply.
Reporting companies that were previously given a reporting deadline later than March 21, 2025, must file their initial BOI report by that later deadline. For example, if a company’s reporting deadline is in April 2025 because it qualifies for certain disaster relief extensions, it should follow the April deadline, not the March deadline.

Plaintiffs in National Small Business United v. Yellen, DC Ala., No. 5:22-cv-01448, are not required to report their beneficial ownership information to FinCEN at this time.

FinCEN Notice FIN-2025-CTA1

Close

The IRS has issued Notice 2025-15, providing guidance on an alternative method for furnishing health coverage statements under Code Secs. 6055 and 6056. This method allows insurers and applicable large employers (ALEs) to comply with their reporting obligations by posting an online notice rather than automatically furnishing statements to individuals.

Under Code Sec. 6055, entities providing minimum essential coverage must report coverage details to the IRS and furnish statements to responsible individuals. Similarly, Code Sec. 6056 requires ALEs, generally those with 50 or more full-time employees, to report health insurance information for those employees. The Paperwork Burden Reduction Act amended these sections to introduce an alternative furnishing method, effective for statements related to returns for calendar years after 2023.

Instead of automatically providing statements, reporting entities may post a clear and conspicuous notice on their websites, informing individuals that they may request a copy of their statement. The notice must be posted by the original furnishing deadline, including any automatic 30-day extension, and must remain accessible through October 15 of the following year. If a responsible individual or full-time employee requests a statement, the reporting entity must furnish it within 30 days of the request or by January 31 of the following year, whichever is later.

For statements related to the 2024 calendar year, the notice must be posted by March 3, 2025. Statements may be furnished electronically if permitted under Reg. § 1.6055-2 for minimum essential coverage providers and Reg. § 301.6056-2 for ALEs.

This alternative method applies regardless of whether the individual shared responsibility payment under Code Sec. 5000A is zero. The guidance clarifies that this method applies to statements required under both Code Sec. 6055 and Code Sec. 6056. Reg. § 1.6055-1(g)(4)(ii)(B) sets forth the requirements for the alternative manner of furnishing statements under Code Sec. 6055, while the same framework applies to Code Sec. 6056 with relevant terminology adjustments. Form 1095-B, used for reporting minimum essential coverage, and Form 1095-C, used by ALEs to report health insurance offers, may be provided under this alternative method.

Notice 2025-15

Close

The IRS has issued the luxury car depreciation limits for business vehicles placed in service in 2025 and the lease inclusion amounts for business vehicles first leased in 2025.

Luxury Passenger Car Depreciation Caps

The luxury car depreciation caps for a passenger car placed in service in 2025 limit annual depreciation deductions to:

$12,200 for the first year without bonus depreciation
$20,200 for the first year with bonus depreciation
$19,600 for the second year
$11,800 for the third year
$7,060 for the fourth through sixth year

Depreciation Caps for SUVs, Trucks and Vans

The luxury car depreciation caps for a sport utility vehicle, truck, or van placed in service in 2025 are:

$12,200 for the first year without bonus depreciation
$20,200 for the first year with bonus depreciation
$19,600 for the second year
$11,800 for the third year
$7,060 for the fourth through sixth year

Excess Depreciation on Luxury Vehicles

If depreciation exceeds the annual cap, the excess depreciation is deducted beginning in the year after the vehicle’s regular depreciation period ends.

The annual cap for this excess depreciation is:

$7,060 for passenger cars and
$7,060 for SUVS, trucks, and vans.

Lease Inclusion Amounts for Cars, SUVs, Trucks and Vans

If a vehicle is first leased in 2025, a taxpayer must add a lease inclusion amount to gross income in each year of the lease if its fair market value at the time of the lease is more than:

$62,000 for a passenger car, or
$62,000 for an SUV, truck or van.

The 2025 lease inclusion tables provide the lease inclusion amounts for each year of the lease.

The lease inclusion amount results in a permanent reduction in the taxpayer’s deduction for the lease payments.

Rev. Proc. 2025-16

Close

The leadership of the Senate Finance Committee have issued a discussion draft of bipartisan legislative proposals to make administrative and procedural improvements to the Internal Revenue Service.

These fixes were described as "common sense" in a joint press release issued by committee Chairman Mike Crapo (R-Idaho) and Ranking Member Ron Wyden (D-Ore.)

"As the tax filing season gets underway, this draft legislation suggests practical ways to improve the taxpayer experience," the two said in the joint statement. "These adjustments to the laws governing IRS procedure and administration are designed to facilitate communication between the agency and taxpayers, streamline processes for tax compliance, and ensure taxpayers have access to timely expert assistance."

The draft legislation, currently named the Taxpayer Assistance and Services Act, covers a range of subject areas, including:

Tax administration and customer service;
American citizens abroad;
Judicial review;
Improvements to the Office of the Taxpayer Advocate;
Tax Return Preparers;
Improvements to the Independent Office of Appeals;
Whistleblowers;
Stopping tax penalties on American hostages;
Small business; and
Other miscellaneous issues.

A summary of the legislative provisions can be found here.

Some of the policies include streamlining the review of offers-in-compromise to help taxpayers resolve tax debts; clarifying and expanding Tax Court jurisdiction to help taxpayers pursue claims in the appropriate venue; expand the independent of the National Taxpayer Advocate; increase civil and criminal penalties on tax professionals that do deliberate harm; and extend the so-called "mailbox rule" to electronic submissions to provide more certainty that submissions to the IRS are done in a timely manner.

National Taxpayer Advocate Erin Collins said in a statement that the legislation "would significantly strengthen taxpayer rights in nearly every facet of tax administration."

Likewise, the American Institute of CPAs voiced their support for the legislative proposal.

Melaine Lauridsen, vice president of Tax Policy and Advocacy at AICPA, said in a statement that the proposal "will be instrumental in establishing a foundation that helps simplify some of the laborious tax filing processes and allows taxpayers to better meet their tax obligation. We look forward to working with Senators Wyden and Crapo as this discussion draft moves forward."

By Gregory Twachtman, Washington News Editor

Close

A limited liability company (LLC) classified as a TEFRA partnership could not claim a charitable contribution deduction for a conservation easement because the easement deed failed to comply with the perpetuity requirements under Code Sec. 170(h)(5)(A) and Reg. § 1.170A-14(g)(6). The Tax Court determined that the language of the deed did not satisfy statutory requirements, rendering the claimed deduction invalid.

Easement Valuation

The taxpayer asserted that the highest and best use of the property was as a commercial mining site, supporting a valuation significantly higher than its purchase price. However, the Court concluded that the record did not support this assertion. The Court found that the proposed mining use was not financially feasible or maximally productive. The IRS’s expert relied on comparable sales data, while the taxpayer’s valuation method was based on a discounted cash-flow analysis, which the Court found speculative and not supported by market data.

Penalties

The taxpayer contended that the IRS did not comply with supervisory approval process under Code Sec. 6751(b) prior to imposing penalties. However, the Court found that the concerned IRS revenue agent duly obtained prior supervisory approval and the IRS satisfied the procedural requirements under Code Sec. 6751(b). Because the valuation of the easement reported on the taxpayer’s return exceeded 200 percent of the Court-determined value, the misstatement was deemed "gross" under Code Sec. 6662(h)(2)(A)(i). Accordingly, the Court upheld accuracy-related penalties under Code Sec. 6662 for gross valuation misstatement, substantial understatement, and negligence.

Green Valley Investors, LLC, TC Memo. 2025-15, Dec. 62,617(M)

Close

The Tax Court ruled that IRS Appeals Officers and Team Managers were not "Officers of the United States." Therefore, they did not need to be appointed under the Appointments Clause.

The taxpayer filed income taxes for tax years 2012 (TY) through TY 2017, but he did not pay tax. During a Collection Due Process (CDP) hearing, the taxpayer raised constitutional arguments that IRS Appeals and associated employees serve in violation of the Appointments Clause and the constitutional separation of powers.

No Significant Authority

The court noted that IRS Appeals officers do not wield significant authority. For instance, the officers do not have authority to examine witnesses, unlike Tax Court Special Trial Judges (STJs) and SEC Administrative Law Judges (ALJs). The Appeals officers also lack the power to issue, serve, and enforce summonses through the IRS’s general power to examine books and witnesses.

The court found no reason to deviate from earlier judgments in Tucker v. Commissioner (Tucker I), 135 T.C. 114, Dec. 58,279); and Tucker v. Commissioner (Tucker II), CA-DC, 676 F.3d 1129, 2012-1 ustc ¶50,312). Both judgments emphasized the court’s observations in the current case. In Buckley v. Valeo, 424 U.S. 1 (per curiam), the Supreme Court similarly held that Federal Election Commission (FEC) commissioners were not appointed in accordance with the Appointments Clause, and thus none of them were permitted to exercise "significant authority."

The taxpayer lacked standing to challenge the appointment of the IRS Appeals Chief, and said officers under the Appointments Clause, and the removal of the Chief under the separation of powers doctrine.

IRC Chief of Appeals

The taxpayer failed to prove that the Chief’s tenure affected his hearing and prejudiced him in some way, under standards in United States v. Smith, 962 F.3d 755 (4th Cir. 2020) and United States v. Castillo, 772 F. App’x 11 (3d Cir. 2019). The Chief did not participate in the taxpayer's CDP hearing, and so the Chief did not injure the taxpayer. The taxpayer's injury was not fairly traceable to the appointment (or lack thereof) of the Chief, and the Chief was too distant from the case for any court order pointed to him to redress the taxpayer's harm.

C.C. Tooke III, 164 TC No. 2, Dec. 62,610

Close

Newsletters

What entities are subject to the new CTA reporting requirements?

Who is considered a “beneficial owner” of a Reporting Company?

Phase-in of reporting requirements

How to prepare for the CTA

Take immediate action now!

Updated Reporting Deadlines

Luxury Passenger Car Depreciation Caps

Depreciation Caps for SUVs, Trucks and Vans

Excess Depreciation on Luxury Vehicles

Lease Inclusion Amounts for Cars, SUVs, Trucks and Vans

Easement Valuation

Penalties

No Significant Authority

IRC Chief of Appeals