In 2020, Congress passed the Corporate Transparency Act (“CTA“), with the goal of establishing more visibility into the ownership of privately held entities. The federal government’s hope is that increased reporting requirements regarding the beneficial owners of corporate entities will assist the federal government in both combating money laundering and enforcing sanction orders.

Under the CTA, a “reporting company” – a company subject to the CTA’s reporting requirements – is responsible for certain filings with the Financial Crimes Enforcement Network (“FinCEN”). The filings generally require entities to submit to FinCEN three categories of information: (1) Reporting Company information (information about the entity itself); (2) Beneficial Owner information (information about the individuals who own or control the entity) and (3) Company Applicant information (information about the persons filing or responsible for directing the filing of documents to form or register a reporting company with a State or Tribal office ) (if the entity is formed on or after January 1, 2024).

Reporting company reports will have to include information such as legal names and trade names or DBAs, addresses, the jurisdiction of formation or registration and taxpayer identification numbers (TINs). Reports regarding beneficial owners (those who own 25% or more of the ownership interests of the entity or have substantial control over the entity) and Company Applicants reporting at the individual level must include legal name, birthdate, address (in most cases, a home address), an identifying number from a driver’s license or passport (or other approved document), and an image of that approved document. In most instances, information reported to FinCEN must be updated any time the reported information is changed.

Violations of the reporting obligations can be met with penalties of $500 per day and a fine of $10,000 and prison sentences of up to two years. The statute and regulations do, however, limit violations to willful conduct.

A more detailed discussion of the filing requirements, and consideration entities should take into account in regards to the CTA, is below.

For Alaska Native Corporations, the CTA may apply to both the parent Native Corporation and all or some of its subsidiaries. Accordingly, Alaska Native Corporations should be aware of, and prepare for, the CTA’s new reporting obligations, which may apply to them in 2024 and 2025.

As an initial matter, although Alaska Native Corporations are authorized pursuant to federal law, under the Alaska Native Claims Settlement Act (“ANCSA”), Alaska Native Corporations, and their subsidiaries, are organized under the laws of the State of Alaska and created by filing Articles of Incorporation (or Articles of Organization for limited liability company subsidiaries) with the State of Alaska. That requirement to file with the State of Alaska renders them subject to the CTA, unless one of the CTA’s stated exemptions apply. In addition, while the CTA exempts tribal entities that exercise governmental authority, this broad exemption does not include Alaska Native Corporations because, as a general matter, Alaska Native Corporations do not exercise governmental authority. In reviewing their potential reporting obligations under the CTA, Alaska Native Corporations should be aware of the following:

1. 1. The CTA’s reporting obligations do not apply to entities who meet all of the following requirements: more than twenty (20) full-time employees, $5,000,000 in gross receipts or sales and an operating presence at a physical office within the United States. Another exemption – the subsidiary exemption – allows wholly owned subsidiaries of a “large operating company” to also qualify for an exemption. Accordingly, if an Alaska Native Corporation has more than twenty (20) full-time employees, $5,000,000 in gross receipts or sales and an operating presence at a physical office within the United States, that Alaska Native Corporation and its wholly-owned subsidiaries (including any wholly-owned entities of those subsidiaries) may not have to comply with the reporting requirements of the CTA.
      1. 1. The calculation of whether an entity has $5,000,000 or more in gross receipts or sales is on a consolidated basis, and must be reflected in a filed Federal income tax return for the previous year;
         2. The calculation of whether an entity has more than twenty (20) full-time employees is not on a consolidated basis. Instead, it is limited to the employees of that individual legal entity (i.e. a parent corporation cannot include the employees of its subsidiaries when calculating whether it has more than twenty (20) employees to determine if falls within the “large operating company” exemption).
         3. The exemption for subsidiaries only applies to wholly-owned subsidiaries. It does not apply to majority-owned entities or joint ventures of the Alaska Native Corporation.
         4. The “large operating company” exemption can be lost if an entity (or its parent company to the extent it is relying on its parent company’s status as a “large operating company”) no longer has more than twenty (20) full-time employees, $5,000,000 in gross receipts or sales and an operating presence at a physical office within the United States. If an entity is no longer subject to the “large operating company” exemption, that entity (and its wholly-owned subsidiaries unless they separately qualify for an exemption from the CTA’s reporting requirements) will have to comply with the reporting requirements of the CTA within 30 days after the date that it no longer meets the exemption criteria.
   2. For those Alaska Native Corporations that have to comply with the CTA’s reporting requirements (i.e. that do not qualify for the “large operating company” exemption or another exemption), the company will have to disclose its “beneficial owners,” which includes individuals who own 25% or more of the ownership interests of the entity and those individuals with direct or indirect substantial control of the entity.
      1. 1. For most Alaska Native Corporations, generally no one individual will own 25% or more of the shares of the Alaska Native Corporation. Thus, Alaska Native Corporations, in general, may not have to disclose the individual shareholders of the corporation because very few, if any, shareholders of Alaska Native Corporations will own 25% or more of the shares of the Alaska Native Corporation.
         2. The CTA, and its implementing regulations, also require the disclosure of those individuals with direct or indirect “substantial control” over the entity. For Alaska Native Corporations, this will generally include the members of their Board of Directors, their CEO, President, CFO, General Counsel, Chief Operating Officer and potentially other senior executives of the corporation. Each Alaska Native Corporation will need to review its own corporate structure to determine which directors, officers or executives need to be included in any reports it is required to provide to FinCEN. Also, individuals with the ability to direct, determine or have substantial influence over important decisions of the Alaska Native Corporation may also be considered “beneficial owners.”
   3. The CTA’s reporting obligations will apply to any entity formed before or after January 1, 2024, unless an exemption (such as the “large operating company” exemption) applies. Entities created before January 1, 2024, and subject to the CTA’s reporting obligations (i.e. an Alaska Native Corporation and its existing subsidiaries to the extent the “large operating company” exemption or another exemption does not apply) must be in compliance with the CTA (i.e. have filed the necessary reports) as of January 1, 2025. For entities created on or after January 1, 2024, they must be in compliance within 30 days of formation. Alaska Native Corporations should therefore be prepared to monitor the formation of new entities starting in 2024 (with a fast 30-day deadline) and, as 2024 approaches, in consultation with their lawyers, which of their existing entities will have to come into compliance with the CTA as of January 1, 2025.

The following are examples of the potential application of the CTA to Alaska Native Corporations. These are only examples, and an individual analysis of each entity and its specific circumstances will be necessary to determine if the CTA does, or does not, apply.

1. An Alaska Native Corporation’s parent company has fifteen (15) employees and $20,000,000 in consolidated gross receipts or sales from a subsidiary.

The parent Alaska Native Corporation likely must file the necessary reports by January 1, 2025, because it was incorporated prior to January 1, 2024, does not have more than twenty (20) employees and therefore does not meet the “large operating company” exemption. This also assumes that no other exemption applies.

1. 2. An Alaska Native Corporation has ten (10) employees at the parent corporation level and is the sole member of a limited liability holding company. That limited liability holding company has twenty five (25) full-time employees, four (4) wholly owned subsidiaries, and a physical office in Anchorage, Alaska. One of the limited liability company’s subsidiaries is a member of a joint venture in which the subsidiary is the 51% member. That joint venture has zero (0) employees because it is an unpopulated joint venture. The Alaska Native Corporation has $20,000,000 in consolidated gross receipts or sales, of which $18,000,000 comes from the holding companies’ subsidiaries.  All entities were incorporated or formed prior to January 1, 2024. 
      1. The parent Alaska Native Corporation likely must file the necessary reports by January 1, 2025, because it does not have more than twenty (20) employees.
      2. The limited liability holding company is subject to the CTA but may be exempt from the filing requirements because the limited liability holding company has twenty-five (25) full time employees, consolidated gross receipts greater than $5,000,000, and a physical office in the United States and therefore likely meets the “large operating company” exemption. Each of the wholly-owned subsidiaries of that limited liability holding company also may be exempt from the CTA’s reporting requirements because the limited liability holding company falls under the “large operating company” exemption and they are wholly-owned subsidiaries of that exempt entity.
      3. The joint venture in which one of the limited liability holding company’s subsidiaries is a 51% member may be subject to the CTA’s filing requirements because it does not have more than twenty (20) employees. The joint venture likely cannot rely on the limited liability holding company’s “large operating company” exemption because the joint venture is not wholly-owned by the holding company or one of the holding company’s subsidiaries. The joint venture is only 51% owned by the subsidiary of the holding company.

As the end of 2023 approaches, Alaska Native Corporations should be aware of their corporate structure and in consultation with their lawyers, determine what members of the corporate family, if any, will need to come into compliance with the CTA’s filing requirements by January 1, 2025.

DISCLAIMER: At this time, Schwabe, Williamson & Wyatt, P.C. is evaluating how best to assist clients that may have questions regarding the CTA and CTA reporting obligations, but any legal advice regarding reporting obligations or application of the CTA to any client will require a new engagement with the firm. If your company is an existing client of the firm and may be a reporting company or has questions about application of the CTA, please note that the firm’s current engagement DOES NOT INCLUDE legal advice regarding your company’s reporting obligations or compliance with the CTA.

For more information on the Act, see Corporate Transparency Act: Reporting Beneficial Ownership Starting January 2024 – What Does it Mean to Your Business?

This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney. Further guidance is expected in the future, so this information may become dated after August, 4 2023.