Part 3

Is Your Company required to report under the CTA?

Your company is required to report under the CTA if it is a “Reporting Company,” unless it qualifies for an exemption.

Is your company a “Reporting Company” under the CTA?

A “Reporting Company” is any of the following:

  • a corporation
  • limited liability company
  • any other entity that is formed by making a filing with a governmental entity.

The following are not Reporting Companies:

  • Sole proprietorships
  • Partnerships that are not formed by making a governmental filing
  • Any other entity that is not a Reporting Company.

Is your company exempt under the CTA?

The CTA provides 23 exemptions. Most are for heavily regulated businesses. The most relevant exemptions for many small businesses will be the exemption for large operating companies, exemption for some subsidiaries of exempt companies, and inactive companies.

  • Large Operating Companies. To be considered a “Large Operating Company,” EACH of the following must be met: 
    • $5,000,000+ Sales: The company must have reported at least $5,000,000 of gross receipts or sales (net of returns and allowances) on its federal income tax or information return with the US for the prior year. This number must exclude gross receipts or sales from sources outside of the United States as determined under Federal income tax principles. A business will never qualify for this exemption until it has filed its first federal income tax return or information return. If the company is part of an affiliated group of corporations that filed a consolidated return, the applicable amount shall be the amount reported on the consolidated return for the group.
    • 21+ Full Time Employees: The company must have at least 21 full time employees in the United States. Generally, if an employee completes at least 130 hours of service per calendar month, they will qualify as a full time employee. The exact method of calculation can be complex and is beyond the scope of this article. Employees of affiliates and subsidiaries cannot be counted towards this requirement. There is no clear guidance that part time employees can be included in calculating the total.
    • Physical Presence in the US. The business must regularly conduct its business at a physical location in the United States that the entity owns or leases and that is physically distinct from the place of business of any other unaffiliated entity. A personal residence may satisfy this requirement if it otherwise meets the standard. 
  • Subsidiaries of some exempt companies. Any company whose ownership is controlled or wholly owned by certain entities that are exempt from CTA reporting obligations, such as large operating companies described above, will also be exempt. Subsidiaries that are only partially owned by eligible exempt companies will still be obligated to comply with the CTA.  See section 1.2 of the Small Entity Compliance Guide for more information on this exemption starting on page numbered 13 of the document.
  • Inactive Companies. This might be the most disappointing of exemptions. If the entity has $0.01 or more, or holds an intangible asset of any kind (such as a business name), it is not eligible. As expressly written, it’s hard to imagine that any entity will qualify for this exemption. To be eligible for an exemption as an inactive company, the company must meet ALL of the following:
    • Formed on or before January 1, 2020
    • Has no assets
    • Conducts no active business
    • No foreign owners
    • No change in ownership in the last 12 months
    • No more than $1000 sent or received in the past 12 months
  • NO Small Business Exemption. If you’re looking for an exemption because your business is too small, you are out of luck.

What if the company becomes exempt in the future?

File an updated report with the Treasury Department within 30 days after the change.

What if the company loses its exemption in the future?

File an updated report with the Treasury Department within 30 days after the change.


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