Farm Businesses Need Not Report
Two weeks ago your columnist shared information from Virginia Tech agriculture law professor Jennifer Friedel about the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) and the Beneficial Ownership Information Reporting Rule passed by the bipartisan Corporate Transparency Act (CTA), requiring disclosure of the identity of beneficial owners of small business entities (LLC’s, S-Corporations, and other entities).
On Dec. 3, a federal district court in the Eastern District of Texas in the case of Texas Top Cop Shop v. Garland placed a nationwide injunction on the CTA. Pursuant to the ruling, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“Fin-CEN”) released a statement confirming that reporting companies are not required to comply with the CTA while the preliminary injunction remains in effect.
Many farms and other small businesses have already submitted their report and for now, these records will be held secure by the FinCEN until the federal executive administration and the attorney general decide whether to appeal the Dec. 3 ruling. Given the timing of the court’s decision, it is likely the decision to appeal will be made under the new executive branch administration and the attorney general it will appoint.
The end of the calendar year has many folks looking at their farm financials. And for those who worked on the FinCEN reporting requirements, it has served as a good prompt to update and, in some cases, tidy-up beneficial ownership arrangements. For most farms, there is not an emergency need to alter ownership arrangements before the end of the calendar year. However, the first months of the new year can be a good time to update and clarify beneficial ownership interests and operating agreements for LLCs and S-Corporations.
Transferring ownership interest (whether by fair market price, at a discount, or as a gift) should be managed with a full understanding of the tax implications. If a farm business has a need to move ownership interests within the entity (typically among family members), federal gifting allowances and rules related to minority interests are tied to the calendar year and it may be advantageous to act quickly before 2024 ends. Farmers or landowners should contact their accounting and tax professional immediately if they think they may need to make transfers.
A portion of this column was taken directly from the National Law Review’s article on the Dec. 3 federal court ruling.
