Category Archives: Business Structuring And Estate Planning

Episode 5: Attorney’s Update on the CTA’s Beneficial Ownership Information Reporting Requirements

LEGAL THOUGHTS – Attorney’s Update Episode 5 on CTA Beneficial Ownership Information Filing Requirements

COLEMAN JACKSON, ATTORNEY & LEGAL COUNSEL | Transcription of Legal Thoughts Posted on March 20, 2024

Topic: The Courts Have Begun to Weigh in on the Transparency Law

Welcome to Legal Thoughts!

Attorney Introduction:

My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, litigation and immigration law firm based in Dallas, Texas. In addition to myself, we have a Legal Assistant, Leiliane Godeiro, Law Clerks, Ayesha Jain and Mlaah Singh, and Admin Assistant, Michelle Gutierrez.

On today’s “Legal Thoughts” podcast, our Law Clerk, Mlaah Singh, will be interviewing me on the important topic concerning the fact that: “The Courts Have Begun to Weigh In on the Corporate Transparency Act.” For more information on the Corporate Transparency Act, please tune in to the first four episodes of this series.

The four parts are as follows:

An Overview of the Corporate Transparency Act
Beneficial Ownership Reports Under the Corporate Transparency Act
Corporate Transparency Act’s Penalties and Intersection with Federal Tax Law
Attorney’s Update on the CTA’s Beneficial Ownership Reporting Requirements

Interviewer Introduction:

Hi everyone, my name is Mlaah Singh and I am a Law Clerk at the tax, business structuring, contracts, litigation and immigration law firm of Coleman Jackson, Professional Corporation. Our law firm is located at 6060 North Central Expressway, Suite 620, right here in Dallas, Texas.

Good afternoon Attorney; thank you for agreeing to sit with me and update our Legal Thoughts podcast audience regarding the Corporate Transparency Act’s Beneficial Ownership Information Reporting Requirements for small and medium sized American businesses. Attorney you told me this morning something about a federal court in Alabama where the court said that the Corporate Transparency Act of 2021 is a violation of the U.S. Constitution. So, I think our Legal Thoughts Podcast audience need to know what this means. Attorney this is a perfect time to update our audience on the CTA and the beneficial ownership reporting requirements of the CTA since it seems like the Courts have began to weigh in here.

Interviewer: Mlaah Singh, Law Clerk

Interviewer Comments: Many in our audience might be thinking perhaps this Court ruling is telling FinCEN to pause all CTA enforcement of the Beneficial Ownership Reporting requirements on small and medium size businesses nationwide. Or what other federal courts are ruling against the enforcement of the CTA. Or what has the U.S. Supreme Court said about FinCEN enforcement under the CTA. I mean our small business owners and quite frankly business owners and their employees need to know what is going on here. This is confusing to none lawyers.

I am going to begin with the question that I think is on the minds of most of our podcast audience: Attorney Jackson, what does this Alabama Court’s ruling mean for small and medium sized businesses in America with respect to any obligation to file an initial beneficial ownership information report with the Financial Crimes Enforcement Network in 2024?

Attorney Answer: Coleman Jackson

Mlaah, this is certainly an excellent question to begin this Corporate Transparency Act update with because an Alabama federal District Court is (for now) the only Court, so far, who has weighed in on constitutionality of the Corporate Transparency Act’s Beneficial Ownership Reporting Requirement that requires all most all small businesses in America to file BOI reports with the Financial Crimes Enforcement Network beginning January 1, 2024. The Alabama District Court in the Northern District of Alabama says that the Corporate Transparency Act of 2021 violates the U.S. Constitution. Court ordered FinCEN to stop enforcing the CTA against the Plaintiff in the case.

The Alabama Court’s ruling in the case, National Small Business United v. Yellen, No. 5:22-cv-0113 8 (N.D. Alabama) on March 1, 2024 enjoined FinCEN from enforcing the Corporate Transparency Act against the plaintiffs in the case– Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and members of the National Small Business Association effective March 1, 2024. Those individuals and entities are not required to report beneficial ownership information to FinCEN at this time.

The Alabama Court’s ruling has no affect on any other small business entities and individuals who are impacted by the Corporate Transparency Act of 2021. I expect other Courts throughout the United States to weigh in on the constitutionality of the Corporate Transparency Act in the next few weeks and months. Ultimately the U.S. Supreme Court is likely to be asked to weigh in the question as to whether Congress exceeded its powers under the U.S. Constitution when enacting the Corporate Transparency Act of 2021. Our audience should stay tune for further judicial decisions regarding the CTA. Our law firm intends to publish updated podcasts and blogs as they are warranted on the CTA and FinCEN’s enforcement of the Beneficial Ownership Reporting Requirements effecting over 42 million small and medium sized business all over the United States.

Interviewer: Mlaah Singh, Law Clerk

So, Attorney Jackson for question number 2, what protections in the U.S. Constitution that might be violated by Congress in enacting the Corporate Transparency Act of 2021?

Attorney Answer: Coleman Jackson

That, Mlaah, is a very important question. It goes directly to some of the Constitutional provisions that informed the legal analysis leading to the Alabama federal Court’s ruling that the Corporate Transparency Act violates the U.S. Constitution. The Court did not decide this case on all of the Constitutional provisions that I am about to discuss here, but I think that Congress’s attempt to regulate most small and medium sized business in the United States under the Corporate Transparency Act could potentially violate most of the Constitutional protections afforded all Americans as follows:

The U.S. Constitution Article 1, Section 8, Clause 3 (Commerce Clause) says, that ” The Congress shall have Power to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” Problem with the CTA seems to be that Congress impermissible attempt under the Corporate Transparency Act to regulate most small businesses throughout the United States, most of whom are likely to be engaged in only intrastate commerce. It is extremely likely that this is an impermissible attempt to regulate small businesses engaged solely in local economic activity.

In the 1787 Constitutional Convention, the framers of the Constitution discussed and decided not to give Congress the power to regulate business structuring; instead, they chose to leave business structuring to the several States. The U.S. Constitution does not contain any enumerated clause that gives Congress the power to regulate small businesses in the U.S. Businesses are and have always been structured under State Business Structuring laws which differ from State to State. The anti-commandeering doctrine is likely to prevent Congress from remedying this problem with the CTA by commandeering the State’s to enact or exercise State power to enforce the CTA.

The U.S. Constitution Article 1, Section 8, Clause 1 gives Congress taxing powers; This provision reads as follows: “The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises.” The CTA does not appear to be a tax because U.S. federal tax laws are codified in 26 United States Code, which is commonly referred to as the Internal Revenue Code. The Internal Revenue Service (IRS) is charged with the responsibility to administer and enforce the federal tax laws in the United States. Whereas the Corporate Transparency Act is administered and enforced by the Financial Crimes Enforcement Network whose data base of small business owners and those with substantial control over them are to be made available to a broad range of federal, state and even international law enforcement agencies to combat money laundering, terrorist funding, tax fraud and other types of financial crimes. Final. The CTA does not seem to be Congress exercising its taxing powers because the penalties under the CTA for filing inaccurate BOI reports or failure file BOI sounds more like fines rather than taxes and the criminal exposure of up to two years sound more like a criminal law provision than a tax law provision. These penalties under the CTA are not pursued by the IRS but by FinCEN.

4th Amendment to the U.S. Constitution says that “the right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.” The CTA seem to violate the 4th Amendment by penalizing businesses; their owners and those in substantial control of them for failure to file BOI reports with a law enforcement agency of the federal government without presenting evidence of probable cause consistent with common 4^th Amendment protections judicial precedence.

5th Amendment to the U.S. Constitution says that, “no person shall be compelled in any criminal case to be a witness against himself, nor deprived of life, liberty, or property, without due process of law…” The CTA seem to violate the 5th Amendment as well because these BOI reports could subject filers to criminal proceedings based on required Beneficial Ownership information.

First Amendment to the Constitution could also be violated by the CTA because it could interfere with small business owners formation of businesses and associations, partnerships or otherwise. The Corporate Transparency Act could potentially cause some Americans not to start a new small business of their own all together when they learn that they have to report to FinCEN the types of personal data required by the Beneficial Ownership Information Reporting Requirements.

Our audience must keep in mind that the Alabama Court’s ruling on the Constitutionality of the Corporate Transparency Act is only the opinion of one Court and is only protecting a limited number of individuals and entities. It is very likely many more courts will weigh in on the Constitutionality of the CTA in the weeks and months to come. Impacted small businesses and those impacted by the CTA or think that they might be impacted by this law, should follow our podcasts and blogs.

Interviewer: Mlaah Singh, Law Clerk

Interviewer Comment: Thank you, Attorney. It seems as though several constitutional rights may be violated in Congress’ pursuit of Corporate Transparency! Largely, and as a recap for our listeners Attorney, its seems like you are telling our Legal Thoughts Podcast audience the First Amendment’s Freedom of Association Clause, the Fourth Amendment’s Probable Cause protections against unlawful searches and seizure, and the Fifth Amendment’s Self-Incrimination protections would all be sacrificed at the expense of FinCEN’s power designed to stop money laundering, terrorist financing, tax evasion and other financial crimes. Now, Mr. Jackson, I understand that a large argument that the United States District Court for the Northern District of Alabama has also raised concerns something about commerce and State government business structuring laws.

Question Number Three:

So, Mr. Jackson, my third question is one: Does the Federal Government have the power to interfere with business structuring and intrastate commerce? Can you identify and explain which provisions are concerned when detailing these questions?

Attorney Answer: Coleman Jackson

The Commerce Clause of 1887, Article 1, Section 8 of the U.S. Constitution, gives Congress the power to regulate commerce with foreign nations, amongst the several States, and with the Indian Tribes. Let me put this in context. The consensus of historians agree that economic issues were one of the major concerns in holding the Constitutional Convention to begin with. Under the Articles of Confederation the federal government was weak in terms of economic regulatory powers whereas the States were powerful with respect to regulating Commerce. This led to trade wars between the states where border states imposed levies, taxes and duties on goods traveling to inbound States. This lead to trade wars and retaliation amongst the States. Under the Articles of Confederation the various States entered commercial agreements directly with foreign nations and the Indian Tribes. The framers of the Constitution favored the United States speaking with one voice in trade agreements with foreign nations and Indian Tribes. Historical consensus is that the Commerce Clause was designed to promote free trade. Most historians agree that the Commerce Clause was put into the U.S. Constitution to solve these problems. So, I think this historical context with respect to what problem its designed to fix is helpful when trying to determine whether Congress exceeded its Constitutional powers when enacting the Corporate Transparency Act.

Article 1, Section 8, Clause 3 of the United States Constitution gives Congress the power to regulate Commerce with foreign nations, amongst the several States and with the Indian Tribes. Most Supreme Court jurisprudence on the Commerce Clause has involved the dormant Commerce Clause because Congress has exercised its positive or affirmative power under the Commerce Clause very rarely. The U.S. Supreme Court has ruled that Congress’ power under the Commerce clause is expansive but has limits. SCOTUS is likely to weigh in eventually to decide whether Congress has exceeded its power under the Commerce Clause in enacting the Corporate Transparency Act. It seems like Congress is attempting to regulate the majority of small and medium sized businesses in the United States using the Commerce Clause. The U.S. Constitution does not expressly give Congress the power to regulate business entities in the United States. In fact businesses are structured under the several States business organizational laws throughout the United States. That is the way its always been and nothing in the U.S. Constitution seem to give this power to the U.S. Congress.

Apparently the federal government created the Corporate Transparency Act on the assumption that Congress has the power to regulate small and medium sized business perhaps under the Commerce Clause, the Taxing Clause or some other Constitutional provision. However, the Alabama federal court heard these arguments put forth by the government and found a difference between power to regulate interstate commerce and intrastate commerce. The Alabama court also found that there was no enumerated provisions in the U.S. Constitution that gives the federal government power over the State’s to set up business structuring laws. Perhaps if left in tact, the Corporate Transparency Act could, at least to a certain extent, cause some businesses structure and form in accordance with FinCEN’s expectations, which is likely to give the federal government power to alter business structuring laws all over the country. As I said before, and I think its worth repeating and emphasizing : Business structuring has been, up to now, left to the State government to determine, decipher, and regulate. The Corporate Transparency Act may change that if permitted to stand.

Interviewer: Mlaah Singh, Law Clerk

Interviewer Comment: I can certainly see how these federal intrusions into State business structuring laws might create a lot of confusion for those desiring to own and operate their own businesses. Its also likely to increase the costs and expense of starting, operating and managing a small and medium sized business in America. This Alabama court may be the first of many court decisions on Congress power to regulate intrastate economic activity and small businesses all over our country. Attorney your explanation on various Constitutional protections might be called into question by the CTA seems to be how you’ve explained the arguments of the United States District Court for the Northern District of Alabama. Our Legal Thoughts Podcast audience needs to stay tune because this might not be the only court who weighs in the Corporate Transparency Act.

Question Number 4 for Attorney Coleman Jackson:

Attorney, for the small to medium sized business owners tuning into our Legal Thoughts Podcast, can you detail specific examples of how the Corporate Transparency Act could both negatively and positively affect business owners? What exactly would be expected of business owners in filling out Beneficial Ownership Reports and what is at stake for business owners who may get the short end of the stick?

Attorney Answer: Coleman Jackson

Mlaah that is an excellent question; but I think the threshold question is whether the Courts will strike down the Corporate Transparency Act like the Alabama Court. This is why I have repeatedly stated in our Legal Thoughts Podcast and Blogs and verbally to small business owners; that we must wait until the Courts weigh in as to whether small and medium sized businesses will have to file Beneficial Ownership Information Reports with FinCEN. The Courts will answer this question in time. This is the practice of law and every small business and individual impacted by the CTA should seek legal counseling on this. This is the practice of law and whether and how anyone should comply with the CTA in any way is a legal question. Lawyers will continue to monitor as the Courts weigh in on this and advise their clients accordingly. This could be a State by State or Circuit Court by Circuit Court determination on the Constitutionality of the CTA. And it is very likely Mlaah that the U.S. Supreme Court will ultimately decide the Constitutionally of the CTA and its BOI reporting requirement. Affected small businesses must comply with the law; but the Courts will guide us as to what the law is. That is how law works in America. The Courts with jurisdiction of you will tell you what your rights and obligations are under the Corporate Transparency Act.

Mlaah you have asked some very inciteful questions during this entire podcast series on the Corporate Transparency Act. So I don’t want you or anyone in our audience to think your question here does not deserve a complete answer. I started with the uncertainty as to whether the CTA violates the protections in the Constitution because that is indeed the threshold question determining whether the CTA is going to have any impact on small and medium sized businesses. If its ruled unconstitutional in the Courts, especially, the U.S. Supreme Court, the CTA is likely to have limited or no impact on small and medium sized businesses.

But as for your questions regarding the likely impact of the CTA; if allowed to stand by the Courts, it will have tremendous impacts and costly ramifications for small businesses. It will also impact estate planning, asset protection planning, elder law planning as well as foreign and domestic businesses structured under State business structuring laws and businesses doing business under those State laws anywhere in the United States. Keep in mind, the CTA is about transparency. Many estate plans and asset protection plans are about secrecy where the wealthy shield their identities and ownership interests through various kinds of trusts and other planning vehicles. The CTA could require hundreds even thousands of individual beneficial ownership reports from a single trust or estate plan, for example. The criminal exposure is also attention grabbing with a potential two years in federal prison upon conviction of violating the CTA and the $500 per day civil fine is definitely attention grabbing as well. The Corporate Transparency Act has very sharp teeth. These consequences are all attention grabbing and should give our audience a clear eyed understanding of why its important that they stay tuned and follow the Court developments and consult attorneys and counselors regarding the Corporate Transparency Act and the developments of FinCEN’s enforcement of the CTA. I have throughout placed the emphasis on the fact that the CTA is a new law. Advising anyone about the CTA is the practice of law and none lawyers are not equipped to advise anyone whether they should or should not comply with the CTA. Affected businesses and individuals need to comply with the law as the Courts say what the law is or is not.

Interviewer: Mlaah Singh, Law Clerk

Attorney, thank you for sitting with me today in our 5th podcast on this emerging news that the “Courts Have Begun to Weigh In on the Corporate Transparency Act” I surely hope our audience will benefit from this update in our Legal Thoughts series on the Corporate Transparency Act of 2021, and stay up to date with us as the Corporate Transparency Act and its impact on small and medium sized business all over our country moves through the federal judiciary. Folks, stay tune to Legal Thoughts Podcasts!

Our audience can send us inquires at www.cjacksonlaw.com if they have questions or wish to comment on our podcasts in this series or any of our Legal Thoughts podcasts, blogs, or Law Watch Videos posted on our U-tube Channel.

Our listeners who want to hear more podcasts like this one please subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever you listen to your podcast. Everybody take care! And come back in about two weeks, for more taxation, business structuring, contracts litigation and immigration Legal Thoughts from Coleman Jackson, P.C., located right here in Dallas, Texas at 6060 North Central Expressway, Suite 620, Dallas, Texas 75206.
English callers: 214-599-0431 | Spanish callers: 214-599-0432 |Portuguese callers: 214-272-3100

Attorney Answer: Coleman Jackson

ATTORNEY’S CLOSING REMARKS:

This is the end of “LEGAL THOUGHTS” for now, thank you all for giving us your ear today as we updated our Legal Thoughts Podcast Episodes 1, 2, 3 and 4 on the Corporate Transparency Act’s (CTA) Beneficial Ownership Information Reporting Requirements on America’s small and medium sized businesses.

Our listeners should stay tuned for possible future Legal Thoughts podcast updates, corrections and explanatory comments as the Corporate Transparency Act is enforced by FinCEN and the Courts weigh in with respect to the Constitutional validity of Congress attempt to regulate the majority of the small and medium sized businesses in America.

Until next time, take care.

If you want to see or hear more taxation, business structuring and contracts litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever you listen to your podcast. Stay tuned! We are here in Dallas, Texas and want to inform, educate and encourage our communities on topics dealing with taxation, litigation and immigration. Until next time, take care.

Episode 4: Attorney’s Update on the CTA’s Beneficial Ownership Information Reporting Requirements.

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Legal Thoughts – Episode 4 of the Corporate Transparency Act

COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW | Transcript of Legal Thoughts

Published October 30, 2023

Topic: “The Corporate Transparency Act’s Beneficial Ownership Information Reporting Requirements”

ATTORNEY INTRODUCTION:

My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, litigation and immigration law firm based in Dallas, Texas.

In addition to myself, we have Legal Assistant, Leiliane Godeiro, Law Clerks, Ayesha Jain and Mlaah Singh, and Adminitrative Assistant, Michelle Gutierrez.

On today’s “Legal Thoughts” podcast, our Law Clerk, Mlaah Singh, will be interviewing me on the important topic of: “The Corporate Transparency Act’s Beneficial Ownership Information Reporting Requirements.”

This has been a series of podcasts, and today’s Episode No 4 is an update as the enforcement date of January 1, 2024 draws near and FinCEN is putting out more public information regarding this topic.

INTERVIEWER INTRODUCTION:

Hi everyone, my name is Mlaah Singh and I am a Law Clerk at the tax, contracts, litigation and immigration law firm of Coleman Jackson, Professional Corporation. Our law firm is located at 6060 North Central Expressway, Suite 620, right here in Dallas, Texas.

Good afternoon Attorney; thank you for agreeing to sit with me and update our Legal Thoughts podcast audience regarding the Corporate Transparency Act’s Beneficial Ownership Information Reporting Requirements for small and medium sized American businesses. Attorney Jackson the implementation date for enforcement of the BOI reporting requirements is getting closer!

Let’s get going. Again in this 4th Episode; Attorney you are going to give our podcast audience an update on the Business Ownership Information Reporting Requirements of the Corporate Transparency Act of 2021.

QUESTION ONE

So, Attorney Jackson, my first question is whether you have any updates, corrections or comments concerning the BOI reporting requirements now that FinCEN has been issuing more-and-more public guidance, publications and so on about their enforcement of the Corporate Transparency Act of 2021 on small and medium sized businesses?

ATTORNEY ANSWER – QUESTION 1

Mlaah, that is a very good question to begin with because I do have updates, corrections and clarifications to our Legal Thoughts Podcast’s Episodes 1, 2 and 3 in our previously published Legal Thoughts Podcast’s CTA series of podcast based on reviewing publications and attending webinar(s) by FinCEN.

The First thing I would like to point out is that resources are available to the public on FinCEN’s website where small businesses can learn about the BOI reporting requirements.

1.On September 29, 2023 FinCEN released a very informative publication entitled, “Small Entity Compliance Guide (BOI- Beneficial Ownership Information Reporting Requirements)”. This is a detailed step-by-step guide for small businesses. The small business owners in our audience can download a copy of this guide from fincen.gov.

2.On October 4, 2023 I attended a webinar hosted by the Internal Revenue Service entitled, “Beneficial Ownership Information Reporting Requirements”. This presentation was given by a representative from the Financial Crimes Enforcement Network. Our audience can probably get a copy of the webinar handout from FinCEN.

3.Our audience can find a lot of information about the Corporate Transparency Act on the Financial Crimes Enforcement Network’s website free of charge to the public. Just go to fincen.gov.

The Second thing I would like to point out are the following take aways from FinCEN’s webinar hosted by the IRS on October, 4, 2023:

1. FinCEN will begin enforcing the Beneficial Ownership Information Reporting Requirements of the Corporate Transparency Act of 2021 beginning January 1, 2024.

2. New small businesses approved by the Secretary of State’s on or after January 1, 2024 must file their initial BOI with FinCEN 30 days after they receive notification from the Secretary of State that their articles of organization have been approved.

3. Small businesses that were created with the Secretary of State before January 1, 2024 must file their initial BOI with FinCEN by January 1, 2025. That means they must file their initial BOI on or before December 31, 2024. Small businesses need to start getting prepared to comply with their BOI requirements; they need to notify key employees and begin gathering the correct identification documents and other information so that they are ready to file their initial BOI reports with FinCEN prior to the January 1, 2025

Continuation of Attorney’s take aways from FinCEN’s webinar on October 4, 2023 hosted by the Internal Revenue Service:

4. FinCEN expects that their might be hitches and mistakes made initially in the first filings or perhaps some businesses will not file because of ignorance of the law. FinCEN intends to give a 90 day grace period before imposing sanctions for non-willful failure to file or errors. Small businesses will have 90 days to comply and correctly file initial BOI with FinCEN.

5. FinCEN intends to impose a $500 per day civil fine on all small business owners and those with substantial control of small businesses for willful violation of the Corporate Transparency Act. Apparently there is no cap on this $500 fine and it runs until the small business comply with the law.

6. FinCEN could refer willful violators of the CTA to the U.S. Department of Justice with the recommendation of criminal prosecution. A crime under the CTA is a maximum 2 years in federal prison and up to $10,000 criminal fine upon conviction.

7. FinCEN’s representative seemed to be unsure as to whether none-lawyers could practice before the Financial Crimes Enforcement But he concluded that a BOI is a form; so, none lawyers could file it on behalf of clients. His presentation is not binding on the U.S. Government. The law is what is binding and anyone who wants to know their responsibilities under the law should read the law for themselves or seek legal advice.

8. FinCEN’s representative mentioned that for small businesses established with the Secretary of State on or after January 1, 2024; the CTA requires Company Applicants to file a report with FinCEN (1) identifying the individual who actually filed the articles of organization with the Secretary of State, and (2) identifying the individuals who directed the filing. FinCEN’s representative did not answer clarification questions related to who fits into the term Company Applicants.

9. The CTA does not require that the BOI be filed annually. However, the CTA does require an updated BOI when any of the initially reported information changes. Examples of such events that require an updated BOI, are address changes and expiration of a driver’s license or passport. Updated BOI’s must be filed within 30 calendar days of such change.

INTERVIEWER: Mlaah Singh, Tax Law Clerk

Thank you Attorney. This additional information certainly adds much value and precise detail to our general understanding from listening to our Law Firm’s Legal Thoughts podcast so far. It is important for small beneficial owners, persons with substantial control of small businesses, and even all small business employees, to know what this BOI filing mandate entails considering the potential stiff punishments that can be imposed on affected small businesses all over America for violation of the Corporate Transparency Act.

QUESTION TWO

My second question for you today, Attorney, is what questions can companies ask themselves to understand whether they are to be a reporting company? Are there different types of reports required for this mandate?

ATTORNEY ANSWER – QUESTION TWO

Thank you for asking this clarifying question. I think it is very important for all members of small and medium sized businesses in America to understand the BOI reporting requirements of the CTA; not simply the Beneficial Owners and those with substantial control of the businesses impacted by the Corporate Transparency Act of 2021.

In answer to your question, I am again going to strongly suggest to our Legal Thoughts podcast audience that they obtain a copy of FinCEN’s “Small Business Compliance Guide on the BOI” because it provides a detailed step-by-step approach to help small and medium sized businesses, their managers and employees to use to determine whether they must comply with the Corporate Transparency Act’s Beneficial Owners Information Reporting Requirements and how to comply.

By no means do I want to imply that it is easy to make the correct determinations using FinCEN’s Small Business Compliance Guide; but it is certainly a good place for small and medium sized businesses to start their analysis. The guide is easy to read, straight forward but yet complex. Small and medium sized businesses should consult with legal counsel in legal matters like these that have such dare financial and potentially criminal consequences.

INTERVIEWER: Mlaah Singh, Tax Law Clerk

Mr. Jackson, that was extremely helpful. FinCen seems to be expecting Beneficial Ownership Information Reports from an extremely large number of working class small and medium sized businesses from all over this country. These reporting requirements seem like they could be a lot of additional costs in operating and running a small business in America.

You mentioned in Episode 1 and 2 of this series that Congress’ intent in passing the Corporate Transparency Act was to help the U.S. Department of Treasury to be better able to discover the ownership and control of American small businesses and insist in their efforts ferret out, detect and prevent financial crimes; such as, tax fraud, terrorist funding, and money-laundering.

QUESTION THREE

Attorney, my final question for today is as follows: Are small and medium sized businesses able to comply with the Corporate Transparency Act without legal representation?

ATTORNEY ANSWER – QUESTION THREE

Mlaah, that is a very empathetic and thoughtful question; and an excellent one. I can tell your focus is on the cost to small businesses in complying with the CTA.

Do you recall what I said awhile ago. When the FinCEN representative was asked a similar question during FinCEN’s Webinar on October 4, 2023, he indicated that non-lawyers could file the BOI reports with FinCEN on behalf of clients. So I think it follows that , small business owners could also file the reports themselves. Self-filing could cut down on the cost of compliance with the CTA; but, I remind everyone in our podcast audience that law can be extremely complex.

The Corporate Transparency Act is complicated, expansive and it’s a completely new federal law designed to regulate most small and medium sized companies in the United States. The CTA became law in 2021. This new law has serious civil penalties and potential criminal consequences. Small and medium sized businesses must be careful and engage in due diligence when planning to comply with the Beneficial Ownership Information Reporting Requirements of the CTA. Our Legal Thoughts podcast audience needs to appreciate that only lawyers are trained in the law. None lawyers should not practice law whether on their own behalf or on the behalf of anyone else.

So in summary; the beneficial ownership information reporting requirements is a brand new framework of federal regulation of small and medium sized businesses in America. It is a lot to be learned by the regulators at FinCEN, the IRS and other governmental agencies. Small and medium sized businesses all over America must adjust and adapt to this CTA scrutiny. The business lawyers advising small and medium sized businesses must watch how the courts interpret these new regulations as FinCEN enforces them. Lawyers will counsel and advocate for their clients accordingly as the CTA and the BOI becomes a part of operating a small and medium sized business in America. In time we will know more about how the Corporate Transparency Act’s Beneficial Ownership Information Reporting Requirements impact American small and medium sized companies.

INTERVIEWER WRAP-UP: Mlaah Singh, Tax Law Clerk

Attorney, thank you for sitting with me today in our 4th podcast on the Corporate Transparency Act and FinCEN’s Beneficial Ownership Information Reporting Requirements. I surely hope our audience enjoyed this update in our Legal Thoughts series on the Corporate Transparency Act of 2021. By the way, our audience can send us inquires at www.cjacksonlaw.com if they have questions or wish to comment on our podcasts in this series or any of our Legal Thoughts podcasts, blogs, or Law Watch Videos posted on our U-tube Channel.

Our listeners who want to hear more podcasts like this one please subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever you listen to your podcast. Everybody take care! And come back in about two weeks, for more taxation, business structuring, contracts litigation and immigration Legal Thoughts from Coleman Jackson, P.C., located right here in Dallas, Texas at 6060 North Central Expressway, Suite 620, Dallas, Texas 75206.

English callers: 214-599-0431 | Spanish callers: 214-599-0432 |Portuguese callers: 214-272-3100

ATTORNEY’S CLOSING REMARKS:

Thank you all for giving us your ear today as we updated our Legal Thoughts Podcast Episodes 1, 2 and 3 on the Corporate Transparency Act (CTA) Beneficial Ownership Information Reporting Requirements on America’s small and medium sized businesses.
Our listeners should stay tuned for possible future Legal Thoughts podcast updates, corrections and explanatory comments as the Corporate Transparency Act is enforced by FinCEN beginning January 1, 2024.

Until next time, take care.

Episode 3: Corporate Transparency Act’s (CTA) Penalties and Intersection with Federal Tax Law

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Legal Thoughts – Episode 3 of the Corporate Transparency Act

COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW | Transcript of Legal Thoughts

Published September 25, 2023
Topic: : “Corporate Transparency Act’s (CTA) Penalties and Intersection with Federal Tax Law”

ATTORNEY INTRODUCTION:

Welcome to Legal Thoughts! My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, contracts, litigation and immigration law firm based in Dallas, Texas.

In addition to myself, we have Legal Assistant, Leiliane Godeiro, Law Clerks, Ayesha Jain and Mlaah Singh, and Admin Assistant, Michelle Gutierrez.

On today’s “Legal Thoughts” podcast, our Law Clerk, Mlaah Singh, will be interviewing me on the important topic of: “Corporate Transparency Act (CTA) Penalties and Intersection with Federal Tax Law”.

For today’s episode, we will focus on the Penalty Provisions of the Corporate Transparency Act and the types of actors who can be assessed the penalties. We will also talk about the IRS and FinCEN intersection in the U.S. Department of Treasury’s pursuit of tax evaders, tax fraudsters, and actors engaged in other financial crimes.

INTERVIEWER INTRODUCTION:

Good afternoon, Mr. Jackson. Thank you for agreeing to sit down with me once again as we begin to dig a little deeper into FinCEN’s new nation-wide enforcement of the Beneficial Ownership Information Reporting Requirements of the Corporate Transparency Act with respect to America’s small and medium sized businesses. At the end of Episode 2 of our CTA Legal Thoughts Podcast series, you warned that the CTA had teeth. Today, my questions are going to focus on how sharp those teeth really are and the intersection between the work of the Internal Revenue Service and the Financial Crimes Enforcement Network in fighting tax violations and other financial crimes. Our podcast audience, may have for sure, been sitting on pens and nettles dying to hear more about all this with how you left them hanging in our Episode 2 about CTA penalty teeth and all.

So anyway, Attorney, today, I will be asking you about the possible consequences if a small and medium sized business is required comply, but fails to comply, with the new CTA beneficiary ownership information reporting requirements..

Audience, let me start my questioning of Attorney Jackson like this: first and foremost, before we get started let me just give a summary of the types of questions that I will be trying to get answers to this afternoon. Hopefully, these areas will answer some of your questions; we do not address specific concerns in our Legal Thoughts Podcast, blogs or Law Watch Videos on our U-Tube Channel. Our publications, like these, are general. If anyone in our audience have specific questions they can call us, write us, or otherwise reach out to us.

(1)who should be concerned about the Corporate Transparency Act’s Penalty Provisions?

(2)what penalties are permitted under the Corporate Transparency Act Penalty Provisions? and

(3)how the Corporate Transparency Act’s Penalty Provision relates to penalties permitted for violations of other laws in the United States, say the Internal Revenue Code; for example?

Now that our stage has been set: Let’s get smarter with our third and final podcast in our Legal Thoughts podcast series dealing with this new federal law called– the “Corporate Transparency Act.”

Interviewer’s Comments:

Mr. Jackson, let’s start Episode No. 3 of our CTA series of Legal Thoughts podcast, right now.

Attorney, I know you talked a lot about the beneficial ownership information reports and 25% ownership interest and such in Episode 2 a couple of weeks ago. I want to circle back and dig deeper into the CTA; so this is my first question of today:

QUESTION ONE

Who should be concerned about the Corporate Transparency Act’s Penalty Provisions?

ATTORNEY ANSWER – QUESTION 1

Mlaah I appreciate how your set the stage for our audience and me. So, I will begin pointing out the actors who should be concerned about the Penalty Provisions in the Corporate Transparency Act. So let me start with actors on the stage.

First Actor: Domestic and foreign reporting companies are defined in the CTA as any business entity structured under any State or Tribal business organizational laws.

Second Actor: Beneficial Owners are defined in the CTA as anyone with 25% or more equity interest in a domestic or foreign reporting company.

Third Actor: Individuals with Substantial Control of the reporting company. This term is defined in the CTA to include literally anyone who has substantial control over the direction and decision making in a reporting company. This includes members of the management team of the reporting company; such as, Chief Financial Officer, Chief Executive Officer, Chief Operating Officer, Treasurer, General Counsel, and President. The term includes anyone in the reporting company that directs, manage and control the reporting company. They all are covered under the CTA’s definition of Substantial Control and they all must file individually beneficial ownership information reports with FinCEN on the schedule I explained in our Legal Thoughts podcast’s Episode 2 a few weeks ago.

Fourth Actor: Conspirators and Co-Conspirators could be anyone who conspires with others to violate the CTA.

Fifth Actor: Anyone who misuse or access FinCEN’s national data base of small & medium sized businesses without authorization or misuse beneficial ownership information reports in violation of the Corporate Transparency Act (CTA).

INTERVIEWER: Mlaah Singh, Tax Law Clerk

Wow all the various actors are on the stage. So, now Attorney, let the curtains open!

Mr. Jackson, please answer my second question as it applies to—

(a) actor number one (this is the reporting company),

(b) actor number two (these are the beneficial owners,

(d) actor number four (these are conspirators and co-conspirators); and finally,

(e) actor number five (these are those who violate FinCEN’s access and authorization protocols and terms of use of FinCEN’s national data base that holds the secure beneficial ownership information reports of America’s small and medium sized businesses.

Okay Attorney Jackson, now that you have identified all the actors on the stage; please answer my second question, which goes like this.

QUESTION TWO

What penalties are permitted under the Corporate Transparency Act Penalty Provisions? Please explain as clear as possible the potential CTA penalty exposure of the various actors on the stage. Please help our Legal Thoughts audience to understand how the CTA Penalty Provisions work as it applies to America’s small and medium sized businesses and those who owns and operates them.

ATTORNEY ANSWER – QUESTION 2

That is an excellent way to organize my answer because law is complicated and the Corporate Transparency Act is no different. It is a sprawling law designed to catch all kinds of actors engaged in various kinds of financial crimes and deception, such as, Covid-19 relief abuse, money laundering, tax fraud, tax evasion and a host of other financial misdeeds through the use of shell companies, structured business entities of all sizes, doing business in deceptive arrangements, such as, deceptive DBAs and a host of other entity fictions spanning across interstate borders and even international borders.

Mlaah, I am saying all this so that our audience will understand that the penalties permitted under the Corporate Transparency Act depends upon the actors, their culpability and the intersection of the CTA with other international, federal, state and local laws. Violators of the CTA could also be violating other federal laws, such as, the Internal Revenue Code in particular; but also state and local laws could be violated by actors who violate the CTA. I am going to limit my discussion in this podcast to penalties under the CTA and possibly the Internal Revenue Code. But our audience must understand that this is not an exhaustive listing of possible penalties that violators of the CTA may face, nor is it intended to be an exhaustive listing of possible civil and criminal penalties that might be possible under other international, federal, state and local laws for crimes uncovered by investigators and prosecutors using the data collected and stored by FINCEN under the CTA. Anyone subject to the mandatory reporting requirements in the CTA should consult their legal advisors and counselors when complying and even contemplating and planning to comply with the CTA’s beneficial ownership information reporting requirements. There are serious civil and criminal consequences for violation of the CTA.

Mlaah, since I have now further set the stage with the seriousness of all this; let me now briefly answer your question as to the actors identified on the stage.

First Actor No 1: Reporting Company- reporting company’s who willfully impedes the filing of a beneficial ownership report, causes an inaccurate report to be filed, or otherwise conspire in deceit in filing a beneficial ownership information report to be filed with FinCEN shall be liable to the United States for a civil penalty of not more than $10,000 and may be fined under title 18, United State Code, imprisoned for not more than 3 years, or both upon conviction. These CTA penalties applies to initial beneficial ownership information reports, corrective reports and the annual beneficial ownership information report. Again all kinds of other international, state and local laws could be implicated for fraudulent and deceitful behavior related to beneficial ownership information reports.

I am going to take actors numbers 2, 3 and 4 together because the CTA penalty provision states, in part, that in general, it shall be unlawful for any person to affect interstate or foreign commerce by knowingly providing, or attempting to provide, false or fraudulent beneficial ownership information, including a false or fraudulent identifying photograph, to FinCEN.

It is also a violation of the CTA penalty provision if anyone willfully fail to provide complete or updated beneficial ownership information to FinCEN.

Further it is a violation of the CTA penalty provision if anyone knowingly disclose the existence of a subpoena, or other law enforcement request under the CTA.

Although I discussed Actor One (the reporting company), separately, every single violation that applies to Actors 2, 3 and 4 also applies to Actor number one– the reporting company.

Note: the CTA penalty provisions do not permit a penalty for negligent violations of the CTA Beneficial Ownership Information Reporting requirements. There are also certain statutory exempt individuals and entity actors. Minors or underage actors and several other types of actors are also statutory exemptions from the CTA’s reporting and penalty provisions. However, those professionals who advise the actors on the stage are included in the meaning of the CTA’s Penalty Provision term, ‘anyone’ ; such as, accountants, lawyers, consultants or anyone else advising small and medium sized businesses. Creditors of reporting companies are, for the most part, statutorily exempt from the CTA reporting requirements, but, not always.

Reasonable Cause Defense Provision: The CTA Penalty Provision states that the Secretary of the Treasury may waive the civil and criminal penalties of the CTA upon determination that the violation was due to reasonable cause and was not due to willful neglect. This CTA waiver provision opens the door to lawyer’s advocacy possibly before FinCEN and even in appropriate judicial forums.

Statute of Limitations: the CTA has a six year statute of limitations. That mean, violators who file a defective report is legally exposed for six years. Typically, in law, a statute of limitations for violation or prosecution does not begin to run until a suitable report is filed in compliance with an actors obligations under the statute. There appears to be nothing in the CTA that alters this general rule in federal law.

Mlaah, I know this has been a long answer; but, I am trying to cover a lot of territory and make the Penalty Provisions of the Corporate Transparency Act as simple as possible to our Legal Thoughts podcast audience. This is a very complicated new federal law. It is a new law enacted in 2020 and it is being implemented and enforced by FinCEN on the time-line that I explained in our Legal Thoughts Podcast’s Episode 2 a few weeks ago. Our listeners who missed Episode 2 in this series of podcasts on the CTA should go back and listen to Episode One and Episode 2.

Let me at this time move on to Actor No. 5 on the stage. Actor No. 5 are organizations and people who violate the Corporate Transparency Act because they either access FinCEN’s national data base without FinCEN’s approval or they use the beneficial ownership information report in violation of the CTA.

The CTA penalty provision states that the criminal penalties provided under section 5322 apply to misuse and unauthorized disclosure of beneficial ownership information. Bottom line– this means potentially years in federal prison upon conviction for misuse and unauthorized access to FinCEN’s secure national data base of America’s small and medium sized companies. I might note here that FinCEN’s national data base is not available to the public.

INTERVIEWER: Mlaah Singh, Tax Law Clerk

Attorney Jackson, no need to apologize for going slowly through the penalty provisions of this complicated new law. I suspect our Legal Thoughts podcast audience appreciated your professorial approach to explaining this difficult material.

Mr. Jackson thanks for the insights you provided today with respect to the penalties permitted under the new Corporate Transparency Act.

You mentioned earlier in this podcast something about penalties under other international, federal, state and local laws that could be intersecting with the penalty provision of the CTA. That sounds extremely interesting. Our audience might be curious about your comment – you made in passing. Particularly, I think it would help if you explain how the Corporate Transparency Act relate to the Internal Revenue Service because it is likely very clear to our podcast audience that the United States Treasury has been vigorously enforcing the federal tax laws forever. Most individuals and businesses listening to us right now, most likely, have been filing federal tax returns with the IRS for years. Are there very serious tax offenses correlated to violations of the Corporate Transparency Act?

You have throughout this Legal Thoughts Podcast series dealing with the Corporate Transparency Act stressed how important it is that all small and medium sized business owners in America should know about the Corporate Transparency Act. You said in Episode 2 of our podcast that the CTA is going into effect beginning January 1st, 2024 for certain new businesses and by January 1st, 2025 for those businesses already existing on January 1st 2024. Our listeners who did not hear the first two podcast in this series may want to visit our Legal Thoughts Podcast where ever they listen to their podcasts.

Thank you for your time this afternoon; Mr. Jackson. If you could clarify what you were saying about the intersection between federal taxes and the Corporate Transparency Act, I think our podcast audience would be grateful. So let us all get smarter this is my last question in this CTA series.

QUESTION THREE

Attorney Jackson, does compliance with the Corporate Transparency Act have any affect on compliance with federal tax laws?

ATTORNEY ANSWER – QUESTION 3

Mlaah, thank you for that very astute final question. Remember what I said in our Legal Thoughts Podcast’s Episode One. The Congressional intent in passing the CTA, and FinCEN’s implementation of Section 6403 of the Corporate Transparency Act (CTA), enacted into law as a part of the National Defense Authorization Act for Fiscal Year 2021 (NDAA), that describe who should file a beneficial ownership information report with FinCEN; the public policies behind enacting and implementing these new laws are to help prevent and combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity committed by actors using corporate structures such as shell and front companies to obfuscate their identities and launder their ill-gotten gains through use of the U.S. financial system. In its final implementation rule issued September 30, 2022, FinCEN gives a detailed analysis of the problem that it has been charged to solve. FinCEN talks about tax evasion, tax fraud and Covid-19 relief violations and violations by shell companies large and small. They even use some recent Department of Justice convictions to explain the problem confronting the nation. Artificial intelligence enabled data bases and networks are likely to result in exposing financial deceit, corruption, and illicit activity of businesses of all sizes and structures that has been long hidden from audit examiners, investigators and prosecutors. The Corporate Transparency Act was passed by Congress to expose financial crimes. The CTA does not say how far back into the past investigators can go investigating crimes under other statutes and laws.

As I pointed out in Episode One, the reporting companies are not limited to corporations; reporting company is defined in the CTA as any entity structured under any business organization code of any State and of any Tribal laws. That includes the smallest of the smallest limited liability companies and any other business entity structured under State and Tribal business laws. Also, arguably the definition of reporting company also includes businesses who are “doing business as” and are often referred to as DBAs. To the extent DBAs have filed organizational or formation documents with, say the Secretary of State, or local, city and county officials they could be required to file beneficial ownership information reports with FinCEN. DBA’s historically have been used by small and medium sized businesses; and sometimes used to deceive the public, engage in financial deceit and tax evasion. So the reach and scope of FinCEN’s activities and its national data base may expose violations of many jurisdictional laws, violations of professional ethics codes and uncover long-hidden deceit. For now, let me just turn to your question about the Corporate Transparency Act’s intersecting with our nations federal tax laws.

Most of our audience has, likely, heard of the Internal Revenue Service. The Internal Revenue Service is a federal agency of the United States Treasury. The IRS is charged with the responsibility to enforce the federal tax laws of the United States. The United States’ tax laws are codified in United States Code Chapter 26; we commonly refer to that as the Internal Revenue Code. The Internal Revenue Service consist, broadly of two divisions. There is the Civil Division where tax returns are processed from all kinds of taxpayers from around the world who must comply with the Internal Revenue Code. There is the Criminal Investigation (CI) Division who conducts criminal investigations regarding alleged violations of the Internal Revenue Code. The Department of Justice pursue prosecution referrals from CID.

So, in answer to your question; the IRS can assess a host of civil penalties ranging from negligence penalties, failure to file penalties, failure to pay penalties, accuracy-related penalties, understatement of income penalties, and many-many-more penalties going all the way up to the 75% civil fraud penalty for certain violations of the Internal Revenue Code. The work of the Civil Division is likely to touch on the work of FinCEN because tax returns, if any, filed with the IRS by the actors who FinCEN uncover engaging in illicit activities through their national data base could aid the IRS Civil Division in uncovering tax fraud, tax evasion and other federal tax violations.

As for the Criminal Division, as I have mentioned; this division of the IRS is tasked with investigating tax crimes and making referrals to the Department of Justice for possible prosecution. Any person who willfully in any manner attempts to defeat, actually defeat, fail to pay, evade any tax under the Internal Revenue Code could be fined not more than $100,000 (individual violators), and $500,000 (corporation violators). Violators of the Internal Revenue Code could also be imprisoned for up to five years in addition to the civil fines.

Our audience need to know that violations of the Internal Revenue Code is extremely serious and the IRS has been pursuing tax violators through their Civil Division and Criminal Division for years. They will have access to FinCEN’s national data base of small and medium sized businesses that is likely to give them a treasure trove of information to pursue tax fraudsters, tax evaders and those cheating the federal tax system. FinCEN and the IRS has been working together on certain maters for years; take for example, foreign bank account reporting violations. The IRS is the agency that pursue FBAR violators although FBAR’s are filed with the Financial Crimes Enforcement Network annually on April 15th. FinCEN is a federal law enforcement agency of the U.S. Department of Treasury. Our audience needs to know that! FinCEN investigates all kinds of financial crimes.

Let me end Episode 3 with this—- Beneficial Ownership Information Reporting Requirements must be taken extremely serious by all small and medium sized businesses structured and operating anywhere in the United States.

INTERVIEWER WRAP-UP: Mlaah Singh, Tax Law Clerk

Attorney, thank you for sitting with me today in our third and final Episode of our Legal Thoughts podcast series on the Corporate Transparency Act; FinCEN’s Beneficial Ownership Reporting Requirements; and the Penalty Provisions of the CTA with respect to several different actors. I hope our audience now understands what you meant when you said in Legal Thoughts Podcast, Episode 2; a few weeks ago, that the Corporate Transparency Act has teeth. Today, you have also clearly shown how federal tax enforcement by the Internal Revenue Service intersects with the investigations of the Financial Crimes Enforcement Network and the beneficial ownership information reports that certain small and medium sized businesses will be required to begin filing after January 1st, 2024. That is only a few months from now, Attorney!

Our listeners who want to hear more podcast like this one please subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or where ever you listen to your podcast. Everybody take care! And come back in about two weeks, for more taxation, business structuring, contracts litigation and immigration Legal Thoughts from Coleman Jackson, P.C., located right here in Dallas, Texas at 6060 North Central Expressway, Suite 620, Dallas, Texas 75206.

English callers: 214-599-0431 | Spanish callers: 214-599-0432 |Portuguese callers: 214-272-3100

ATTORNEY’S CLOSING REMARKS:

This is the end of “LEGAL THOUGHTS” for now

Thank you for giving us your ear today as we explained the Corporate Transparency Act’s (CTA) Penalty Provision and the intersection between the Internal Revenue Service and Financial Crimes Enforcement Network’s efforts to combat illicit activities, corruption, tax fraud and tax evasion. Our listeners would like to read our tax blogs (we have published many-many tax blogs on various topics over the years), visit our law firm’s website at www.cjacksonlaw.com to access our free blogs. Our listeners should stay tune for future Legal Thoughts podcast on various topics in our practice areas.

Stay tuned! We are here in Dallas, Texas and want to inform, educate and encourage our communities on topics dealing with taxation, contracts, litigation and immigration. Until next time, take care.

Episode 2: Beneficial Ownership Reports Under the Corporate Transparency Act

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Legal Thoughts – Episode 2 of the Corporate Transparency Act

COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW | Transcript of Legal Thoughts

Published September 11, 2023
Topic: “FINANCIAL CRIMES ENFORCEMENT NETWORK (FINCen), U.S. Treasury’s Beneficial Ownership Information Reporting Requirements”

ATTORNEY INTRODUCTION:

My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, contracts, litigation and immigration law firm based in Dallas, Texas.

In addition to myself, we have a Legal Assistant, Leiliane Godeiro, Law Clerks, Ayesha Jain and Mlaah Singh, and Admin Assistants, Ernesto Munoz and Michelle Gutierrez.

On today’s “Legal Thoughts” podcast, our Law Clerk, Mlaah Singh, will be interviewing me on the important topic of: “Beneficial Ownership Information Reports and American Small & Medium Size Business’ Obligations Under the Corporate Transparency Act”. Episode No 2 is a continuation of our Legal Thoughts Podcast Series on Corporate Transparency Act.Today’s episode, we will focus on Beneficial Ownership Information Reports; and, what small and medium size business owners must comply with mandatory reporting requirements.

INTERVIEWER INTRODUCTION:

Good afternoon Attorney. Thank you for agreeing to sit with me as we continue our discussion of this hot business law topic! Now, let’s begin our second podcast in our Series dealing with The Financial Crimes Enforcement Network’s enforcement of the Corporate Transparency Act as it relates to certain small and medium size American businesses as you explained in excruciating detail a few weeks ago in our first episode of this series of our law firm’s Legal Thoughts Podcasts. Our listeners who missed Episode One should listen to the first episode published a weeks ago to fully understand this Second Episode; since this Second Episode is a continuation and builds on what Mr. Jackson explained in Episode One about the Corporate Transparency Act and the Anti-Money Laundering Act of 2020.

QUESTION ONE

Attorney Jackson during our last conversation regarding the Corporate Transparency Act was certainly enlightening and somewhat frightening as well. I think the small and medium sized business owners listening to our Legal Thoughts Podcast might have numerous unanswered

Questions. Mr. Jackson, you made crystal clear in your comments in Episode One that a lot of small and medium sized businesses are expected to be impacted by the Corporate Transparency Act. A big question that I have to begin with today is this one: Attorney, exactly how will affected owners of small and medium size companies report their ownership interest?

ATTORNEY ANSWER – QUESTION 1

That is certainly a good question Mlaah to start our Episode 2; and, it is one that will help listeners decipher if they are part of this jurisdiction’s demographic obligated to comply with the Corporate Transparency Act. The short answer is that small and medium size business owners impacted by the Corporate Transparency Act reporting requirements will identify themselves by filing timely Beneficial Ownership Information Reports with the Financial Crimes Enforcement Network which is an agency within the U.S. Department of the Treasury. FinCEN is not the IRS which is also an agency of the Department of Treasury that our audience are likely to be more familiar with when complying with the U.S. States federal tax laws.

Let me try to explain this in more details in simple terms. Mlaah, if an individual’s ownership interest in a required reporting company is less than 25%, that individual would be exempt from the obligation to file a Beneficial Ownership Information Report with the Financial Crimes Enforcement Network. On the other hand, if an individual’s ownership interest in a required reporting company is 25% or greater, that individual would have an obligation to file a Beneficial Ownership Information Report with the Financial Crimes Enforcement Network. Beneficial Owner; therefore, means an individual who owns 25% or more equity interest in a reporting company. The term “reporting company” under the CTA means a business entity structured under any State or Tribal business structuring laws. Such as, business filing articles of organization under the Business Organization Code in Texas and filed with the Texas Secretary of State’s Office; or in other States, businesses filing organizational documents under a similar set of structuring laws. It is extremely important for our podcast audience to understand that each individual within a particular reporting company must file individually a Beneficial Ownership Information Report with FinCEN if they meet the 25% reporting threshold. The BOIR’s are not filed by the entity or at the reporting entity level.

The CTA places the mandatory reporting obligation directly on the individual owners that meets the ownership interest thresholds that I mentioned a short while ago. Repeat, the individual that owns 25% or more equity interest in the reporting company must comply with your reporting obligations under the Corporate Transparency Act. This is a micro- individual reporting of interest requirement; and it turns the Financial Crimes Enforcement Network’s national database into a concentrated network that maps out any and all ‘substantial control’ of small and medium size business enterprises throughout the United States. As I stressed in Episode One, and again now; the term reporting companies include any business entity structured under any State or Tribal business structuring laws, such as corporations, limited liability companies, and other type of entities.

My dear podcast listener; corporate transparency is not limited to businesses structured as corporations. These reporting requirements apply to mom and pop limited liability companies for example. They were not exempted by Congress or FinCEN in enacting the rules to enforce the Corporate Transparency Act. The CTA Beneficial Ownership Information Reporting requirements apply to the smallest required reporting entities. They are not exempt.

Mlaah, as I pointed out in Episode One, FinCEN’s fundamental objective is to classify all substantial owners to fully enact the intent of Congress in enacting the Anti-Money

Laundering Act of 2020 to combat money laundering, tax evasion, tax fraud, terrorist financing, corruption and other nefarious financial crimes committed by American small and medium sized businesses. The Corporate Transparency Act is a part of the Anti-Money Laundering Act of 2020. FinCEN is charged with enforcing the CTA. Shining sunlight on American small and medium sized businesses is what the CTA is all about. This FinCEN national database is designed to show FinCEN, the IRS and others who substantially control American business enterprises.

There are ongoing discussions with respect to access controls, constitutional, and privacy issues associated with FinCEN’s national database. The fundamental policies in Congress enacting these laws and giving the U.S. Department of Treasury these broad enforcement powers is to expose those who own and substantially control American small and medium sized businesses to FinCEN, the IRS and other law enforcement agencies (domestic and foreign) for the good of the United States economy, where American citizens have lost job opportunities, business secrets and know-how and even many Americans have been priced out of real estate markets by concealed purchasers all over the country; for the good of our national security by detecting and preventing illicit financial activity where businesses and owners have concealed their real identities and hidden their criminal activity by using shell business entities and used deception for years in anonymous activity, such as, hidden ownership structuring schemes and like behavior in many industries throughout the country.

INTERVIEWER: Mlaah Singh, Tax Law Clerk

Thank you Attorney. This insight that you shared with our Legal Thoughts podcast audience will definitely help business owners make timely decisions to protect their company under FinCEN’s new regulations. Having this data across businesses within the spectrum that you just mentioned will indeed likely protect this country from small and medium sized businesses engaged in tax fraud, terrorist financing, corruption and other types of activities that diminish economic opportunities and damage our economy and our country more expansively. Who owns American small businesses will now be securely held within the U.S. Treasury’s national database. Now that our audience understands who is impacted by this regulation and why this Act is designed to shine bright lights on business ownership in our country; my next question is this one.

QUESTION TWO

Mr. Jackson, could you please explain in detail what information exactly must be disclosed in a Beneficial Ownership Information Report? What information about these small and medium sized business owners stored in FinCEN’s national database?

ATTORNEY ANSWER – QUESTION TWO

That is an astute question because the types of information required to be disclosed by small and medium sized American business owners and the information stored in FinCEN’s national database goes to heart of whether FinCEN can accomplish its mandate under the Anti-Money

Laundering Act of 2020 to ferret out money launderers, tax fraud artists, tax evaders and others allegedly engaged in financial crimes. It is important for podcast audience to understand that there really isn’t too much information required to be disclosed in a Beneficial Ownership Information Report; but the value of that information for investigatory purposes by FinCEN, the Internal Revenue Service and others could be invaluable in investigating tax fraud, tax evasion and all of the other crimes that law enforcement is trying to expose and uncover. This is a list of the required information that must be reported by Beneficial Owners of Small and Medium Sized American Business impacted by the CTA:

The Beneficial Owners Legal Name;
The Beneficial Owner’s Date of Birth;
The Beneficial Owner’s Residential Address Address;
The Reporting Company’s Business Address; and
Government Issued Photo Identification Card, such as, State Driver’;s License, Passport, or other valid identification document.

This document must be uploaded to FinCEN along with the Beneficial Ownership Information Report. Repeat: this type of information, although not extensive, is being collected by FinCEN to carry out its enforcement obligations under the Corporate Transparency Act relating to its efforts to prevent money laundering, tax fraud, tax evasion, terrorist financing and other financial crimes. The required information on the substantial ownership of small and medium sized businesses will be stored on the Financial Crimes Enforcement Network’s national database. Once the impacted small and medium sized business owner complies by giving FinCEN all of the information that I have just mentioned by sending it directly to FinCEN, the impacted small and medium sized business owner will have successfully fulfilled their obligations under the Corporate Transparency Act. I think I should mention here however that FinCEN could have questions concerning the submissions and request additional information or otherwise investigate based on the submissions.

These CTA reporting requirements become effective for business structured after January 1, 2024 on January 1, 2024 and the impacted business owners are required to file their Beneficial Ownership Information Reports within 30 days of their Article of Organization is approved

by the applicable State or Tribal government agency. These CTA reporting requirements become effective for all other impacted businesses on January 1, 2025. In other words, businesses existing or structured before January 1, 2024 have another year to comply. Any required reporting entity and its beneficial owners should make appropriate plans to begin complying with the Beneficial Ownership Information Report requirements right away since the drop deadline for all impacted businesses is January 1st , 2025. This gives beneficial owners in businesses started before January 1, 2024 from around the nation exactly one calendar year to counsel with their legal counselors and advocates to prepare and comply with their obligations under the Corporate Transparency Act.

Finally Mlaah, in answering your question; I think it is very important for me to point out to our Legal Thoughts podcast audience that; although, these Beneficial Ownership Information Reports are to be held within FinCEN’s secure national database, it is extremely important, for everyone to understand who will have access to this information and the procedures or safeguards in place to protect this information. Now these access protocols are not absolutely clear at this time. But it appears that there is a limited number of governmental corporations that may be granted access to specific information by sending an access request to the Financial Crimes Enforcement Network explaining the justification for their request to search FinCEN’s national database of owners of small to medium sized businesses. According to FinCEN’s final rules implementing the CTA; FinCEN will manually reject and accept requests through their

Beneficial Ownership IT system. The rules go on to say that business owners’ information will be securely held and will only be distributed upon consent from both the requestor and the company for their BOI’s to be shared externally.

The Final Rule implementing the CTA says that the corporations and the governmental agencies able to access Beneficial Ownership

Information Reports upon consent are as follows.

– 1. U.S., Federal, State, Local, and Tribal governmental agencies

– 2. Foreign law enforcement agencies, judges, prosecutors, and central authorities

– 3. Financial institutions who request BOIs with the justification of complying with their obligations under the Bank Secrecy Act and other statutes and laws regarding “know your customer banking laws” and the bank’s consumer due diligence requirements. This

includes actions required of these financial institutions under law.

– 4. Federal functional regulators and appropriate regulatory agencies acting in supervisory capacity accessing the financial condition of financial institutions

– 5. Finally, the U.S. Department of Treasury; specifically FinCEN which is the Financial Crimes Enforcement Network and the IRS which is the Internal Revenue Service (the agency charged with the responsibility to enforce America’s federal tax laws).

Finally, FinCEN’s Final Rule implementing the Corporate Transparency Act states that information may be extracted from FinCEN’s national database only for investigative purposes and within the bounds of law enforcement. Beneficial owners may still trust the security of this system as information must be formally and officially approved by the Financial Crimes Enforcement Network before release to the organizations, agencies and others.

INTERVIEWER: Mlaah Singh, Tax Law Clerk

Thank you for that insight Mr. Jackson. The implementation of the Corporate Transparency Act seems to be extremely comprehensive and should improve the United States government in its ability to detect tax fraud, tax evasion and other financial crimes around America. Our viewers, the Attorney, might be wondering what kind of punishment power are given to FinCEN under the Corporate Transparency Act.

QUESTION THREE

Everyone might be wondering what kind of penalties can be imposed on business owners who refuse to comply or file these beneficial ownership information reports? In the third podcast in our series, are you planning to talk about punishment under the CTA? Can you tell our Legal Thoughts Podcast audience what they can expect from our next couple of podcasts in this CTA podcast series (say podcast three and four; what topics will you talk about as it relates to the implementation of the CTA by FinCEN)?

ATTORNEY ANSWER – QUESTION THREE

Okay Mlaah, thank you for teeing up our next Legal Thoughts podcast in this series, which is Episode 3 where I intend to focus on the civil and criminal penalties that can be assessed against violators of the Corporate Transparency Act’s beneficial owner reporting requirements. So, your final question is an excellent question.

Mlaah, given the fact that there are many aspects of this jurisdiction that will impact a large demographic in America I will attempt to answer the following types of questions in Episode 3 in this CTA series of Legal Thoughts:

What are the penalties for non-willful violations of the Corporate Transparency Act?
What are the penalties for willful violations of the Corporate Transparency Act?
What is the range of monetary penalties allowable under the Corporate Transparency Act?
What is the range of criminal penalties which could lead to federal jail time for violators of the CTA upon conviction?

For now let me make it clear to our audience, the Corporate Transparency Act has teeth. Small and medium sized businesses impacted by the CTA could incur serious civil penalties and several years in federal prison for failure to file timely Beneficial Owner Information Reports with the Financial Crimes Network. Our audience should stay tuned to future publications of our law firm’s Legal Thoughts Podcast.

INTERVIEWER WRAP-UP: Mlaah Singh, Tax Law Clerk

Attorney, thank you for sitting with me today in our first podcast on the Corporate Transparency Act and FinCEN’s Beneficial Information Owner Reporting Requirements We plan to record and publish in a few weeks about three to four more podcasts in this series on the Corporate Transparency Act where Mr. Jackson intends to shed more light on the impacts of the CTA on certain small and medium sized business owners.

Our listeners who want to hear more podcasts like this one please subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever you listen to your podcast. Everybody take care! And come back in about two weeks, for more taxation, business structuring, contracts litigation and Immigration Legal Thoughts from Coleman Jackson, P.C., located right here in Dallas, Texas at 6060 North Central Expressway, Suite 620, Dallas, Texas 75206.

English callers: 214-599-0431 | Spanish callers: 214-599-0432 | Portuguese callers: 214-272-3100

ATTORNEY’S CLOSING REMARKS:

I want to thank our Legal Thoughts Podcast audience for giving us your attention today as our Law Firm’s Law Clerk, Mlaah Singh, interviewed me with respect to the Financial Crimes Enforcement Network’s Beneficial Owner Information Reports and its impact on certain small and medium sized business owner’s obligations under the Corporate Transparency Act. We intend to talk more about the FinCEN implementation of the CTA in a couple more podcasts in the next few weeks or so. Our listeners should stay tune for future podcast in this series; definitely, our listeners who run their own businesses should tune into Episode 3 where I go through the possible civil and criminal penalties imposed on violators of the Corporate Transparency Act’s Beneficial Ownership Information Reporting requirements!

If you want to see or hear more taxation, business structuring and contracts litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever you listen to your podcast.

Stay tuned! We are here in Dallas, Texas and want to inform, educate and encourage our communities on topics dealing with taxation, litigation and immigration.

Until next time, take care.

Episode 1: An Overview of the Corporate Transparency Act

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Legal Thoughts – Episode 1 of the Corporate Transparency Act

COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW | Transcript of Legal Thoughts

Published August 28, 2023
Topic: “FINANCIAL CRIMES ENFORCEMENT NETWORK (FINCen), U.S. Treasury’s Beneficial Ownership Information Reporting Requirements

Attorney Introduction:

My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, contracts, litigation and immigration law firm based in Dallas, Texas, United States of America. In addition to myself, we have our Legal Assistant, Leiliane Godeiro, Law Clerks, Ayesha Jain and Mlaah Singh, and Admin Assistants, Ernesto Munoz and Michelle Gutierrez.

On today’s “Legal Thoughts” podcast, our Law Clerk, Mlaah Singh, will be interviewing me on the important topic of: “Beneficial Ownership Reports” This is a series of podcasts, and today’s episode, which is our first podcast in this series will focus on: “An Overview of the Corporate Transparency Act (CTA)”

Interviewee: Hi everyone, my name is Mlaah Singh and I am a Law Clerk at the tax, contracts, litigation and immigration law firm of Coleman Jackson, Professional Corporation. Our law firm is located at 6060 North Central Expressway, Suite 620, right here in Dallas, Texas, United States of America.

Interviewer Introduction:
Good afternoon Attorney; thank you for agreeing to sit with me as I interview you with respect to this hot business law topic: “FinCEN Beneficial Ownership Information Reports” Let’s get started with our first podcast in this Series: A Brief Overview of the Corporate Transparency Act! Attorney, this topic seems to be timely and very-very important for our Legal Thoughts podcast audience. I look forward to interviewing you on the Corporate Transparency Act.
Question Number One:
It seems like this law will impact practically every small and medium size business in America. Is that right? Could you explain what public policy goals are behind the enactment of the Corporate Transparency Act?

Interviewee: Coleman Jackson, Lawyer

ATTORNEY ANSWER – QUESTION 1

Mlaah, you are absolutely right with respect to the potential scope and impact of the Corporate Transparency Act. No one should be fooled by the word ‘corporate’ in the title of the law. This law is going to impact small and medium size businesses structured and doing business in the United States under State business structuring laws whether they are a corporation or not. Your question is a very astute question. So let me begin with why Congress enacted the Corporate Transparency Act. In 2020, the Anti Money Laundering Act was enacted by Congress with the intent to detect, expose and prevent money laundering and other nefarious financial crimes. The Act hoped to increase financial information sharing between companies and their respective partners, subsidiaries, and with their international locations or operations. Under this statute, the Financial Crimes Enforcement Network (FinCEN) was charged with the authority and responsibility to complete a three-year study to ensure that the impacts of this Act on American businesses was a positive one. Congress’ goal in enacting the statute was to combat money-laundering, detect financial corruption, and other nefarious business activities in American business. The Corporate Transparency Act, or CTA is Section 6403 of the Anti-Money Laundering Act of 2020. The CTA was enacted in 2021 and its effective date is January 1, 2024. It is estimated that the national implications of enactment of the Corporate Transparency Act on American businesses will be huge. More than 32 million small and medium sized companies throughout every State in the United States are expected to be impacted.
That is in a nutshell why our law firm is recording this new Corporate Transparency Act Legal Thoughts podcast series. We think that it is very important that our podcast audience know what the CTA does, who it impacts, what is required of them, and the potential civil and criminal consequences if small and medium size businesses do not timely comply with the Corporate Transparency Act.

Companies in America impacted by the CTA will have to file Beneficial Ownership Information Reports with the Financial Crimes Enforcement Network that will be accessible within one secure national database that holds vital information in order to improve the U.S. Department of the Treasury’s ability to detect, oversee and prevent financial crimes. The Internal Revenue Service (IRS) is likely to improve its ability to ferric out tax fraud, tax evasion other tax crimes exposed when the real owners (beneficial owners) of U.S. businesses are required to give their lawful names, addresses and contact information in Beneficial Ownership Information Reports filed with FinCEN beginning January 1, 2024. I will explain the Beneficial Owner Reporting requirements in more detail in a future Legal Thoughts podcast in this CTA series. Our audience, if interested in knowing more about the CTA, should subscribe to our Legal Thoughts podcast.

According to the Congressional record and the Federal Register Final Rule 31 CFR Part 1010 published by the Financial Crimes Enforcement Network; some reasons for enacting the CTA are to “help prevent and combat money laundering, terrorist financing, corruption, tax fraud and other illicit activity”. Integrity in American businesses is vital to the vibrancy and health of the economy of the United States and, frankly, the health of the global economy. I think the public policy behind the U.S. Congress in enacting the CTA is grounded on this fundamental principle objective. Corruption is a contaminant that destroys fair competition and thereby damages everyone’s potential.

As I mentioned early in the podcast, the Financial Crimes Enforcement Network (FinCEN); which is an agency of the United States Department of Treasury, is the federal agency empowered with the authority and responsibility to enforce the Corporate Transparency Act. This organization is commonly referred to as simply “FinCEN”. FinCEN is the same agency where banks have reported certain suspicious banking transaction activities for years. FinCEN is the same agency where we have assisted clients to file FBARs reporting their foreign bank accounts and other foreign assets and holdings. FBARs currently are filed each year with FinCEN on or before April 15th.FinCEN is charged with the authority and power to doggedly work to collect and analyze vital information regarding domestic and foreign financial affairs. To combat money laundering, terrorist financing, fraud, and a plethora of other financial crimes. FinCEN’s mission is to protect the integrity of American businesses and their relationship with their government. Dishonesty, corruption and fraud unchecked erodes trust and thereby destroys relationships.

INTERVIEWER: Mlaah Singh, Tax Law Clerk

Interviewer Comment:

Thank you Attorney. I think our audience can understand now why the CTA was enacted. Everyone of us should be given the opportunity to excel, contribute and serve our country and contribute to the global good. Unbridled and unchecked dishonesty, fraud and corruption prevents us individually and collectively as a country from achieving our true potential. Attorney I think it’s good that you intend to shine more light on this topic by doing more podcasts on the impact of the Corporate Transparency Act on small and midsize businesses throughout our country.
Question Number Two:
Interviewer: My second question for you today, Attorney, is my final question of the day on this topic; and, it is this one: What other areas are you planning to discuss in our future podcast regarding the Corporate Transparency Act?

Interviewee: Coleman Jackson, Lawyer

ATTORNEY ANSWER – QUESTION 2

Mlaah, your comment is a good summary of what I said about the public policy behind the United States Congress enacting the Corporate Transparency Act of 2021. As for your second question; in future podcast on the CTA, I intend to explain the following:
1. What the Corporate Transparency Act requires;
2. Who must comply with the Corporate Transparency Act;
3. What must small and medium sized businesses do to comply to FinCEN;
4. Where, when, and how individuals may file their Beneficial Ownership Information Report
5. What are civil and criminal penalties can be applied for failure to comply with the Corporate Transparency Act

INTERVIEWER WRAP-UP : Mlaah Singh, Tax Law Clerk

Attorney, thank you for sitting with me today in our first podcast on the Corporate Transparency Act and FinCEN’s Beneficial Owner Reporting Requirements. Today’s podcast was just an overview of the public policy behind Congress’ enacting the Corporate Transparency Act. We have about three to four more podcasts scheduled in this series where our law firm intends to shed more light on the impacts of the CTA.

ATTORNEY’S CLOSING REMARKS:

Thank you all for giving us your ear today on the Corporate Transparency Act (CTA) Overview”.

We intend to talk more about the FinCEN implementation of the CTA in several more podcasts in the next few weeks or so. Our listeners should stay tuned for future podcasts in this series; definitely, our listeners who run their own businesses!
If you want to see or hear more taxation, business structuring and contracts litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever you listen to your podcast.
Stay tuned! We are here in Dallas, Texas and want to inform, educate and encourage our communities on topics dealing with taxation, litigation and immigration.

Until next time, take care.

THE IMPORTANCE OF ESTATE PLANNING & ASSET PROTECTION

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By: Coleman Jackson, Attorney & Certified Public Accountant

May 1, 2023

So many Americans died during the Covid-19 Pandemic! Many families learned during this period of hardship and lost that estate planning and asset protection is not merely for the powerful and well-to-do but is for everyone. You see, we are not born to stay here and everyone need to plan their exit most importantly spiritually but also temporally. We are all passing through. We are all fellow travelers on this journey towards life. We form relations; we impact other’s lives for the good or bad; we amass property and other things during this journey. Estate planning embodies our goals and objectives as to how we desire to protect our love ones and pass our personal legacy and property and things to our love ones, charities and whoever else we choose. Estate Planning allows us to choose when beneficiaries inherit or receive our wealth. Estate planning allows us to plan for incapacities that might come our way. Estate Planning and Asset Protection is very important. It is the responsible thing to do!

Many Americans learned during Covid-19 that they or their love ones failed to properly plan for being incapacitated for long-periods of time or their sudden deaths. Many Estate Planning, Tax and Asset Protection Lawyers have seen an uptick of families and individuals with these type matters on their heart and in their minds these days. They are determined not to make the mistakes of their elders in failing to plan for their incapacities and demise. I think the public needs to know about asset protection and estate planning.

That is why I am writing this blog on estate planning and asset protection today. It will be published and free of charge to anyone who goes to our law firm’s website www.cjacksonlaw.com and click on our blog page. Incapacity, death and taxes impacts all of us one way or another eventually regardless of our economic station in life, or our cultural background or any other particular as it relates to us.

What is Estate Planning and Asset Protection:

Definitions: Estate Planning– Proper estate planning allows you to plan for yourself and your loved ones (which include your family, your church and community) without giving up control of your affairs. Your estate plan should allow for the possibility of your own disability. It should give what you own to whom you want, when you want, and the way you want at the least amount of costs.

Estate Planning is so important that you cannot afford not to do it and when you do it you cannot afford not to hire competent legal representation. Estate Planning and Business Structuring are state specific which means that state law impacts your estate plan. That means that if you are a resident of Texas; you should strongly consider hiring a lawyer licensed in Texas. Federal tax law is implicated so you should consider hiring a lawyer skilled in the relevant sections of the Internal Revenue Code.

Some general things you could possibly talk to your estate planning lawyer about during your initial consultation:

There are five common ways to pass assets to your intended loved ones –

Wills
Trusts
Beneficiary designations (e.g., life insurance, pensions, IRAs, etc.)
Joint property arrangements
Life estate deeds
Non-probate Assets
Joint tenancy with right of survivorship
Payable on death accounts
Joint Accounts
Life Insurance

Tax Issues– The specter of taxes is always there (so, you cannot ignore the tax ramifications of dying. Some of the basic tax considerations that you need to discuss with your estate planning attorney about during your initial consultation are as follows:

Federal Unified Tax Credit
Estate Taxes
Gifts and gift tax
Community Property vs Separate Property—Texas is a community property state and the impact of that reality on estate planning cannot be underestimated.
Property Taxes—Texas property taxes are some of the highest in the nation. Many elderly people fall behind on their property taxes and lose their property due to delinquent taxes. And often time those who inherit property in Texas is unaware of these delinquent tax problems until they are faced with foreclosure procedures. Due diligence is required to investigate the various ways property of an estate is encumbered.

Some more things to talk about during your initial consultation with your estate and asset protection lawyer. It is very helpful if your estate planning and asset protection lawyer is schooled in federal tax issues because federal taxes are always around potentially impacting the value of your estate. You should consider asking about—

Importance of Having a Will
Basic Types of Wills
Community property laws in Texas
Will and testamentary trust
Special provisions and things unique to you
Executors
Execution of Wills
Revocation of Wills
Effect of Divorce on Wills and Trusts and Community Property
Effect and Implication of Immigration Status, the United States of America is a land of immigrants and many immigrants have family, business interest and property in their native countries; therefore, effective estate planning and asset protection must consider these facts and circumstances. Pre-immigration planning in some cases is critical. Immigration status cannot be ignored in estate planning and tax planning.

What else might you consider bring up during your initial consultation with your estate planning and asset protection lawyer.

Ancillary Documents: So, what are these all about? Dying is not all you have to think about. During Covid-19, folks were in the hospital for months-and-months-and months. Who was to handle their household affairs? Who was to handle their business affairs? Who was to take care of their minor children? Incapacity issues are also part of effective estate planning and asset protection. Estate planning is about planning for your being unable to care for yourself, your minor children and your financial affairs. Some tools estate planning lawyers use in consideration of your incapacity to act for yourself are as follows:

Durable Powers
General Powers
Special Powers
Revocation of POAs
Health Care POAs
Directive to Physicians
Trusts
Creation of trusts
Purpose, Types and Taxes with respect to Trusts
Community Property Agreement and Pour-over Will
Crummey Powers
Termination of the Trusts
Marital and Bypass Trusts
When Trust are not advisable
How Trusts work
Living Trust
QTIP Trusts
Charitable Remainder Trusts

Guardianships
What about Long-Term Care? (Elder Care, such as Social Security, Nursing Homes,

SSI, Medicare, Medicaid and Hospice). These matters too are addressed in comprehensive estate and asset protection.

CONCLUSION: ESTATE PLANNING AND ASSET PROTECTION IS NOT ABOUT THE DOCUMENTS

Estate planning is not about the documents! Estate Planning is all about your goals and objectives in passing your legacy, values and property to who you want and how you want and when you want with the least amount of spillage such as for taxes, court costs and other expenses as possible. It is dangerous to pull documents off the internet or obtain them from friends, relatives or others because law is complicated and what you find on the internet or elsewhere might not accomplish your goals and objectives. A counseling attorney is critical for effective estate planning, tax planning and asset protection. These plans need to be within the bounds of all applicable international, federal, state and local laws and ethical principles. What are your goals and objectives in such matters as these?

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader. You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432 | Portuguese (214) 272-3100

THE IMPORTANCE OF ESTATE PLANNING & ASSET PROTECTION

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By: Coleman Jackson, Attorney & Certified Public Accountant

April 26, 2023

What is Estate Planning and Asset Protection:

Definitions: Estate Planning– Proper estate planning allows you to plan for yourself and your loved ones (which include your family, your church and community) without giving up control of your affairs. Your estate plan should allow for the possibility of your own disability. It should give what you own to whom you want, when you want, and the way you want at the least amount of costs.

Some general things you could possibly talk to your estate planning lawyer about during your initial consultation:

There are five common ways to pass assets to your intended loved ones –

Wills
Trusts
Beneficiary designations (e.g., life insurance, pensions, IRAs, etc.)
Joint property arrangements
Life estate deeds
Non-probate Assets
Joint tenancy with right of survivorship
Payable on death accounts
Joint Accounts
Life Insurance
Tax Issues– The specter of taxes is always there (so, you cannot ignore the tax ramifications of dying. Some of the basic tax considerations that you need to discuss with your estate planning attorney about during your initial consultation are as follows:

Federal Unified Tax Credit
Estate Taxes
Gifts and gift tax
Community Property vs Separate Property—Texas is a community property state and the impact of that reality on estate planning cannot be underestimated.
Property Taxes—Texas property taxes are some of the highest in the nation. Many elderly people fall behind on their property taxes and lose their property due to delinquent taxes. And often time those who inherit property in Texas is unaware of these delinquent tax problems until they are faced with foreclosure procedures. Due diligence is required to investigate the various ways property of an estate is encumbered.

Importance of Having a Will
Basic Types of Wills
Community property laws in Texas
Will and testamentary trust
Special provisions and things unique to you
Executors
Execution of Wills
Revocation of Wills
Effect of Divorce on Wills and Trusts and Community Property
Effect and Implication of Immigration Status, the United States of America is a land of immigrants and many immigrants have family, business interest and property in their native countries; therefore, effective estate planning and asset protection must consider these facts and circumstances. Pre-immigration planning in some cases is critical. Immigration status cannot be ignored in estate planning and tax planning.

What else might you consider bring up during your initial consultation with your estate planning and asset protection lawyer.

Ancillary Documents: So, what are these all about? Dying is not all you have to think about. During Covid-19, folks were in the hospital for months-and-months-and months. Who was to handle their household affairs: Who was to handle their business affairs? Who was to take care of their minor children? Incapacity issues are also part of effective estate planning and asset protection. Estate planning is about planning for your being unable to care for yourself, your minor children and your financial affairs. Some tools estate planning lawyers use in consideration of your incapacity to act for yourself are as follows:

Durable Powers
General Powers
Special Powers
Revocation of POAs
Health Care POAs
Directive to Physicians

Trusts

Creation of a Trusts
Purpose, Types and Taxes with respect to Trusts
Community Property Agreement and Pour-over Will
Crummey Powers
Termination of the Trust
Marital and Bypass Trusts
When Trust are not advisable
How Trusts work
Living Trust
QTIP Trust
Charitable Remainder Trusts

Guardianships
What about Long-Term Care? (Elder Care, such as Social Security, Nursing Homes,

SSI, Medicare, Medicaid and Hospice). These matters too are addressed in comprehensive estate and asset protection.

CONCLUSION: ESTATE PLANNING AND ASSET PROTECTION IS NOT ABOUT THE DOCUMENTS

Estate planning is not about the documents! Estate Planning is all about your goals and objectives in passing your legacy, values and property to who you want and how you want and when you want with the least about of spillage such as for taxes, court costs and other expenses as possible. It is dangerous to pull documents off the internet or obtain them from friends, relatives or others because law is complicated and what you find on the internet or elsewhere might not accomplish your goals and objectives. A counseling attorney is critical for effective estate planning, tax planning and asset protection. These plans need to be within the bounds of all applicable international, federal, state and local laws and ethical principles. What are your goals and objectives in such matters as these?

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432 | Portuguese (214) 272-3100

Podcast – Update on Covid-19 Relief for Individuals and Businesses | LEGAL THOUGHTS

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Coleman Jackson, P.C. | Transcript of Legal Thoughts Podcast
Published January 11, 2021.

Legal Thoughts is a podcast presentation by Coleman Jackson, P.C., a law firm based in Dallas, Texas serving individuals, businesses, and agencies from around the world in taxation, litigation, and immigration legal matters.

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Reyna Munoz, Tax Legal Assistant of Coleman Jackson, P.C. The topic of discussion is “Update on Covid-19 Relief for Individuals and Businesses” You can listen to this podcast by clicking here:

You can also listen to this episode and subscribe to Coleman Jackson, P.C.’s Legal Thoughts podcast on Apple Podcast, Google Podcast, Spotify, Cashbox or wherever you may listen to your podcast.

TRANSCRIPT:

ATTORNEY: Coleman Jackson
Legal Thoughts
COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW

ATTORNEY: Coleman Jackson

Welcome to Tax Thoughts

My name is Coleman Jackson, and I am an attorney at Coleman Jackson, P.C., a taxation, litigation and immigration law firm based in Dallas, Texas.
Our topic for today is: “Update on Covid-19 Relief for Individuals and Businesses.”
Other members of Coleman Jackson, P.C. are Yulissa Molina, Tax Legal Assistant, Leiliane Godeiro, Litigation Legal Assistant, Reyna Munoz, Immigration Legal Assistant and Mayra Torres, Public Relations Associate.
On this “Legal Thoughts” podcast our immigration legal assistant, Reyna Munoz will be asking the questions and I will be responding to her questions on this important tax topic: “Update on Covid-19 Relief for Individuals and Businesses.”

Reyna Munoz Introduces Herself to the Audience:

Good morning everyone. My name is Reyna Munoz, and I am the Immigration Legal Assistant at Coleman Jackson, P.C. Coleman Jackson, P.C. is a taxation, litigation and immigration law firm based right here in Dallas, Texas.
Attorney a lot of folks are receiving bills from the IRS claiming that they owe a “shared responsibility payment for failure to maintain healthcare coverage on members of their household”. I mean some of these bills are for tax periods that are a long time ago, like 2015, 2017 and 2018. What is this about?
Question 1: Just tell me, what is this all about?

Attorney: Coleman Jackson

ANSWER 1:

Good morning Reyna.
Yes Reyna; Congress recently passed and the President recently signed into law a $900 Billion Covid Relief Package with quite a few tax provisions. The package includes $600 payments to individual taxpayers with adjusted gross income (AGI) of $75,000 or less or in case of head of households with adjusted gross income (AGI) of $112,500. The new relief payment for joint return tax filers is $1,200 with AGI of $150,000 or less. And taxpayers receive $600 for each qualifying child. The new relief package also extended the weekly federal unemployment compensation of $300 for qualified individuals who lost their jobs due to Covid-19.”.

Interviewer: Reyna Munoz, Immigration Legal Assistant

Question 2:

Attorney, who qualifies for the recovery rebate tax credits or stimulus checks?

Attorney: Coleman Jackson

ANSWER 2:

Other than the adjusted gross income limitations that I mentioned, the following individuals are eligible to receive stimulus checks unless specifically ineligible:
Everyone is eligible other than —

Any nonresident alien individual;
Any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins; and
Any estate or trust.

To summarize: Anyone who does not fall into either 1, 2 or 3 above is eligible to receive a stimulus check.

Interviewer: Reyna Munoz, Immigration Legal Assistant

Question 3:

What is the substantial presence test?

Attorney: Coleman Jackson

ANSWER 3:

Reyna; that is an excellent question!
In United States Tax Law a nonresident alien is any individual who is not a United States Citizen and does not pass the Green Card Test or Substantial Presence Test.
To summarize: A Nonresident is anyone who is not

a United States Citizen; or
a Lawful Permanent Resident or Green Card Holder; or

a person who passes the substantial presence test with respect to length of physical presence within the United States. We go into detailed discussions of the substantial presence test in prior blogs which can be found on our website and in prior podcast as well. So I will not go through this mechanical test again now.

Interviewer: Reyna Munoz, Tax Legal Assistant

QUESTION 4:

Attorney how does an eligible individual apply for a stimulus check?

Attorney: Coleman Jackson

ANSWER 4:

Well, taxpayers don’t exactly have to apply for stimulus checks.
Taxpayers who are eligible to receive a stimulus check will receive the check by direct deposit to any account to which the taxpayer authorized the IRS to send refunds or federal payments to on or after January 1, 2019. In the event the taxpayer does not authorize the IRS to direct deposit the stimulus check the United States Treasury will mail a paper check or debit card directly to the last known address of the taxpayer. The law requires the Treasury to send out these payments as rapidly as possible. Eligible individuals should already have received their stimulus check or should receive them pretty soon.

Interviewer: Reyna Munoz, Tax Legal Assistant

That sounds easy enough; but Attorney!

Question 5:

How will the United States Treasury know the correct amount of money to send to the taxpayer?

Attorney: Coleman Jackson

ANSWER 5:

Excellent question!
The stimulus payment computations and eligibilities will be based on tax returns filed by taxpayers for the tax period ending December 31, 2019.

Interviewer: Reyna Munoz, Tax Legal Assistant

Question 6:

What should families do if they think they are eligible but they have not received a stimulus check at all or in the wrong amount?

Attorney: Coleman Jackson

ANSWER 6:

They should contact the Internal Revenue Service and inquire.

Interviewer: Reyna Munoz, Tax Legal Assistant

Covid-19 has killed a lot of people. And also lots of people have died since December 31, 2019; my question is whether their heirs, such as, surviving spouses and children going to receive their deceased relatives stimulus payments. I am kind of wondering about this since the tax refunds or credits are based on tax returns filed for tax periods ending December 31, 2019. Is that right!

Question 7:

Attorney, are the heirs of a deceased individual eligible to receive a stimulus check on behalf of the decedent?

Attorney: Coleman Jackson

ANSWER 7:

The “Consolidated Appropriations Act, 2021”. That is the official title of the United States Law that was recently passed by Congress that implemented the tax provisions we have been talking about this morning in this podcast.
Under the “Consolidated Appropriations Act, 2021”; any individual who was deceased before January 1, 2020 or in case of joint return, both taxpayers were deceased before January 1, 2020; the heirs of those taxpayers would not receive the stimulus payment.
Under the Act, any individual who dies after January 1, 2020 or in case of joint return, both taxpayers die after January 1, 2020, the lawful heirs of those taxpayers should be able to claim the stimulus payment. They might have to specifically make a claim with the IRS like you would normally in a decedent representative case. What I am saying is that I am not sure the U.S. Treasury would know to send the stimulus payment to a decedent’s heir or representative unless they are told of the decedent’s death.

Reyna Munoz’s Concluding Remarks

Attorney, thank you for this cogent presentation.
I know we have not talked about the $900 Billion Covid Relief Packages’ tax implications for businesses yet. Perhaps we can talk more about this and produce a future podcast or blog.
Our listeners who want to hear more podcast like this one should subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever they listen to their podcast. Everybody take care! And come back in about two weeks, for more taxation, litigation and immigration Legal Thoughts from Coleman Jackson, P.C., which is located right here in Dallas, Texas at 6060 North Central Expressway, Suite 620, Dallas, Texas 75206.
English callers: 214-599-0431; Spanish callers: 214-599-0432 and Portuguese callers: 214-272-3100.
English callers: 214-599-0431 and Spanish callers: 214-599-0432.

Attorney’s Concluding Remarks:

THIS IS END OF “LEGAL THOUGHTS” FOR NOW

Thanks for giving us the opportunity to inform you about “Updates on the Recent $900 Billion Covid Relief Package Recently Enacted Into Law. We talked basically about the Stimulus Payments in this blog; but there are many individual and business tax provisions in the “Consolidated Appropriations Act, 2021”. We could do several future podcast and blogs on this massive piece of legislation. If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Stay tune! Watch for a new Legal Thoughts podcast in about two weeks. We are here in Dallas, Texas and want to inform, educate and encourage our communities on topics dealing with taxation, litigation and immigration. Until next time, take care.