Reported by Libby Bloxom, Jonathan Epstein, and Alan Winston Granwell of Holland & Knight LLP

The Corporate Transparency Act (CTA), enacted by Congress as part of the Anti-Money Laundering Act of 2020, for the first time under federal law, requires the establishment of a centralized, national beneficial ownership information (BOI) registry. The purpose of the registry is to combat the proliferation of anonymous shell companies that facilitate the flow and sheltering of illicit money in the United States to assist law enforcement to curb money-laundering, terrorism financing, corruption, tax fraud and other criminal activity.

Given the widespread use of special purpose entities used to hold aircraft title, determining whether a CTA filing is required will become a part of virtually every aircraft transaction.

Should I Be Thinking About These CTA Reporting Requirements in Structuring Ownership and Operations of Aircraft?

In general, it is expected that existing considerations regarding tax planning, liability protection and Federal Aviation Administration (FAA) regulatory compliance should outweigh the relatively modest additional requirement (in most cases) of reporting under the CTA; as such, structuring to avoid filing may be counterproductive. For example, if an individual decided to own an aircraft in his or her own name, rather than through a special purpose entity to avoid CTA requirements, the individual’s name would appear on the FAA registry, a publicly available database, and in addition, the individual would be exposed to unnecessary liability risks.

However, parties may decide to structure the management or ownership of the Reporting Company so as to limit the number of individuals who are in substantial control or who own 25 percent or more of the entity.

What Should Owners and Their Advisors Be Doing to Prepare for CTA Implementation?

• Gather the facts and make an initial determination as to whether the entity is 1) out of scope, 2) exempt or 3) is a Reporting Company. Expect teething pains during the initial implementation of the CTA, both by FinCEN and by financial institutions and counterparties who may be overly aggressive in requiring information on filings or proof that your entity is exempt.
• Conduct entity hygiene, whether you are a filer or not. This may include the following:
  • Ensure that you have all the reportable information. Review and update information on beneficial ownership and officers/managers of the Reporting Company as ownership of entities may change for tax or other reasons, and managers or officers also may change. Also, ensure that information on file with the FAA or trustees/banks regarding beneficial ownership is current to avoid any inconsistencies.
  • Review organizational and transactional documentation. Consider amending operating agreements of existing entities (or forms for new entities) to require compliance with the CTA, and for the member/shareholder to provide information necessary for the Reporting Company to comply with the CTA and if not, to provide sanctions; in addition, given that the CTA will require the Reporting Company to obtain PII, privacy concerns should be addressed.
  • In advance of the Jan. 1, 2024, effective date, if existing Reporting Companies have multiple officers/managers that do not have actual control, it may be advisable to remove them before Jan. 1, 2024, so as to minimize PII collection and streamline reporting.
  • Verify that the Reporting Company is in good standing in the state of incorporation and in any state where it is registered to do business.
• Given the duty to update or correct information reported to FinCEN within the applicable 30-day period, if you have a Reporting Company, ensure that your attorneys and accountants are aware of the filing/requirements, so that if changes were to occur in the future, information can be updated timely and correctly.
• If you are an aviation attorney or advisor, think about how you will reach out to clients to alert them of this imminent reporting requirement.

Read full report: https://www.jdsupra.com/legalnews/a-fast-approach-the-corporate-4633726/