Summary

New York State’s LLC Transparency Act, that will come into effect December 21, 2024, complements the Federal Corporate Transparency Act by requiring New York limited liability companies and foreign limited liability companies registered to do business in New York to separately report their beneficial ownership information to the New York Department of State. In this briefing, attorneys in Ballard Spahr’s Corporate Transparency Act Task Force discuss the similarities and differences between the two acts, and open questions that remain surrounding companies’ obligations.

On December 22, 2023, New York Governor Hochul signed the LLC Transparency Act (NY LTA) into law. The NY LTA becomes effective December 21, 2024, and complements the Federal Corporate Transparency Act (Fed CTA) by requiring New York limited liability companies and foreign limited liability companies registered to do business in New York to separately report their beneficial ownership information to the New York Department of State.

The NY LTA amends the New York Limited Liability Company Law, which can be found in Chapter 34 of New York's Consolidated Laws. Importantly, while there are some differences between the NY LTA and the Fed CTA, as highlighted below, the definitions of key terms like “beneficial owner,” “initial report,” and “reporting company” are incorporated by reference from the Fed CTA. As a result, compliance with the Fed CTA will largely result in compliance with the NY LTA, except that a separate filing with the New York Department of State is required.

Similarities:

• Purpose—The stated purpose of both the Fed CTA and NY LTA is to provide law enforcement with better information to detect and prosecute crime.
• Beneficial Owners—The definition of “beneficial owner” is incorporated by reference from the Fed CTA, such that if a person is determined to be a beneficial owner under the Fed CTA, they will also be a beneficial owner under the NY LTA.
• Exclusions—The 23 exclusions from the definition of “beneficial owner” under the Fed CTA are carried over in the NY LTA. However, as discussed below, excluded entities have no duty to report under the Fed CTA but must report the basis for their exclusion under the NY LTA.
• Amendments—The Fed CTA and NY LTA both require reporting of changes to information previously filed, such as an address change or the addition of a new beneficial owner.

Differences:

• Exempt Certification—Companies that are exempt from filing under the Fed CTA are not required to file anything with FinCEN, but are still required to file a certification with the New York Department of State.
• Company Type—The NY LTA applies only to limited liability companies that are either formed in New York or registered to do business in New York, while the Fed CTA applies to any entity formed by registering with a state or authorized to do business in a state.
• Timing—The NY LTA requires the filing of beneficial ownership information at the same time as formation of the entity, whereas the Fed CTA requires such filing within 60 or 90 days after formation. However, the penalties are structured as follows:
  • Under the NY LTA, a reporting company that fails to file its New York beneficial ownership report within 30 days of formation will be shown as “past due.”
  • After two years of non-filing the company will be shown as “delinquent.”
  • Upon delinquency, the New York Department of State will send a notice to the last known address, and after 60 days, the company will be required to pay $250 to remove the delinquency.
• Photo Identification—The NY LTA does not require the submission of a copy of a beneficial owner’s identification document, but does require the submission of an identification number.
• Penalties—Penalties under the NY LTA are limited to $250, as discussed above. Penalties under the Fed CTA include a fine of $500 per day, plus up to $10,000 in additional fines, and up to two years in prison.
• Separate Filing—While the New York Department of State requires a separate filing from the Fed CTA filing, the NY LTA filing requirements can be satisfied using the same information as used for the Fed CTA filing.
• Deadlines—Under the Fed CTA, companies formed prior to January 1, 2023, are not required to file their initial beneficial ownership interest report until January 1, 2025. Under the NY LTA, companies formed (or registered to do business in New York) before December 21, 2024, must file with the New York Department of State no later than January 1, 2025, whereas companies formed (or registered to do business in New York) after December 21, 2024, must file with the New York Department of State at the time of formation (or registration to do business).

Open Questions:

• FinCEN Guidance—Significant guidance has and will continue to develop around the interpretation of the Fed CTA. Will New York State follow those interpretations?
• Separate State Interest—Since state and local law enforcement will be authorized under the Fed CTA access rule to access federal beneficial ownership reports, why does New York need its own, separate law?
• Timing—What is the purpose of having penalties delayed for two years and sixty days after the date of non-compliance?

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