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Your Health Care Organization Could Be Subject to the Corporate Transparency Act (CTA)

on Thursday, 29 February 2024 in Health Law Alert: Erin E. Busch, Editor

The Corporate Transparency Act (CTA) is a federal law that requires many companies doing business in the United States to report certain information about ownership and control of the company.  It is important that a health care organization understands whether it is subject to the CTA.  The following Q&A provides some guidance as you evaluate whether the CTA applies to your organization.

Is my health care organization subject to the CTA?

Possibly.  The CTA requires reporting companies to report certain information to the Financial Crimes Enforcement Network (FinCEN).  “Reporting companies” include corporations, LLCs, LLPs, and other entities, unless otherwise exempted.

Which exemptions apply to my health care organization?

The CTA exempts twenty-three types of entities from its reporting requirements.  The most applicable exemptions for health care organizations include (i) governmental authorities and (ii) tax-exempt entities. In addition, large U.S.-based operating companies (i.e., greater than 20 full-time employees and greater than $5 million in gross receipts or sales and physical presence in the U.S.) are also exempt. 

How does my health care organization report its exemption?

If your health care organization initially meets an exemption, then it does not need to report the exemption to FinCEN.  

If the parent company of my health care organization meets an exemption, is my entire organization (including subsidiaries) also exempt from the CTA?

No.  For a subsidiary organization to also be exempt from the reporting requirements, it must be wholly (100%) owned by the parent organization that holds the exemption.  Meaning, ambulatory surgery centers or other joint ventures with physician ownership are still subject to the CTA reporting requirements or must separately meet an exemption.

If the CTA applies to my health care organization or a subsidiary, what must be disclosed?

A reporting company must provide information regarding itself and its “beneficial owners,” and for an entity formed on or after January 1, 2024, the entity’s applicant.  A “beneficial owner” is any individual who either (i) owns or controls at least 25% of the equity in the reporting company or (ii) exercises substantial control over the reporting company (including senior officers).  Even if individual ownership of an organization does not amount to 25%, the reporting requirements still apply to those individuals with substantial control. 

A reporting company must disclose the following information regarding itself:  full legal name; any trade names or “doing business as” (DBA) names; current address; jurisdiction of formation or registration; and tax identification number (TIN) or employer identification number (EIN).

A reporting company must disclose the following information regarding its beneficial owners (and if formed or registered after the effective date, its company applicant(s)):

  • Full name
  • Date of birth
  • Current residential address
  • A unique identification number from a non-expired identification document (i.e., a state-issued driver’s license, U.S. passport, a state or local government ID)
  • An image of the identification document supplying the unique identification number

When must the information be reported?

Date of Formation/Registration

Filing Deadline

Formed or registered on or after January 1, 2024, and before January 1, 2025

Within 90 days of formation/registration

Formed or registered on or after January 1, 2025

Within 30 days of formation/registration

Formed or registered before January 1, 2024

Prior to January 1, 2025*

*On December 12, 2023, the U.S. House of Representatives passed the Protect Small Business and Prevent Illicit Financial Activity Act (HR 5119).  Such bill would, among other things, delay the CTA for existing companies to January 1, 2026.  The bill has been received by the U.S. Senate, read twice, and referred to the Committee on Banking, Housing, and Urban Affairs. 

In addition to the initial reporting requirements described above, reporting companies must continuously update or correct their reports within thirty days of any change in the reported information—such as changes to the company’s name, address or jurisdiction, and changes to beneficial ownership upon a transfer, issuance, or death. There is no materiality threshold for reporting changes; therefore, all changes currently require an updated filing with FinCEN.

Where is the information reported?

FinCEN intends to warehouse beneficial ownership information reported in a secure nonpublic database known as the Beneficial Ownership Secure System (“BOSS”).  Access to this data will be strictly controlled and granted on a case-by-case basis and will not be publicly available.  On January 1, 2024, BOSS became operational to the public for filings.  Companies may file themselves or may engage third parties to assist with filing on their behalf.  FinCEN has cautioned the public that there is fraudulent correspondence being circulated, and that reporting companies will not receive unsolicited requests from FinCEN.

Are there penalties for non-compliance?

Yes! Failure to report carries civil and criminal penalties. For example, willful non-reporting can result in a fine of up to $500 per day (capped at $10,000) and up to two years of imprisonment.  Failure by a reporting company to disclose correct information can also be penalized, and this can extend to individuals who influence the reporting company not to report, as well as senior officers of the reporting company in charge at the time of non-compliance.

Where can I get more information or assistance?

You can reach out to our health care CTA point person:

Kristin Lindgren

1700 Farnam Street | Suite 1500 | Omaha, NE 68102 | 402.344.0500