New York Transparency Act To Kick In Next Year

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New York’s owner information reporting requirement, similar to a contenuous regulation killed by the federal government months ago, begins Jan. 1.

The New York LLC Transparency Act (NYLTA) is about to create new reporting rules for New York limited liability companies beginning Jan. 1. NYLTA looks to enhance ownership transparency – and in doing so will create new compliance responsibilities for many business owners.

Who, what and when
Owners of LLCs formed in New York and foreign LLCs authorized to do business in the state will have to file a beneficial ownership information (BOI) report with the NY Department of State. Each company will be required to disclose on its BOI report identifying information pertaining to each individual who directly or indirectly exercises substantial control or owns or controls 25% or more of the ownership interests of a Reporting Company and the individuals involved in the company’s formation or registration to do business in New York.

In its BOI report, NY Reporting Companies must include the following about its Beneficial Owners and Applicants (who registered the company to do business) in its BOI report: (1) full legal name; (2) date of birth; (3) current home or business street address; and (4) a unique identifying number from an acceptable identification document (e.g., U.S. driver’s license or U.S. or foreign passport).

The deadlines:

• Existing LLCs (formed or registered before Jan. 1, 2026) must file an Initial Beneficial Ownership Information (BOI) Report by Dec. 31, 2026.
• LLCs (formed or registered on or after Jan. 1, 2026) must file their BOI Report within 30 days of formation or registration.
• Exempt LLCs must file an attestation of exemption, signed under penalty of perjury and accompanied by supporting documentation.
• All LLCs will also be required to file annual updates confirming or amending ownership information.

Penalties for noncompliance can include daily fines of up to $500, an initial $250 fine and, in severe cases, suspension or dissolution by the state. (Unlike the federal CTA, the NYLTA does not impose criminal penalties.) A safe harbor in place for persons who correct an inaccuracy in a previously filed disclosure statement or attestation of exemption containing inaccurate information within 90 days of the inaccurate submission, so long as the false or fraudulent information was not willfully submitted for the purpose of evading the law.

New York says it will maintain the information of beneficial owners in a secure, non-public database. The information, though confidential, can be released by court order; to government officers or employees who need the information to perform official duties; and to law enforcement.

Resembles federal law?

The U.S. Corporate Transparency Act (CTA) was passed in 2020 as part of the Anti-Money Laundering Act of 2020, establishing BOI reporting for certain types of corporations, LLCs and other similar entities created in or registered to conduct business in the United States. A company was to have reported BOI to the Financial Crimes Enforcement Network. In March, the U.S. Treasury essentially suspended the CTA/BOI reporting requirement for U.S. persons.

New York has not let go.

“Anonymous corporate ownership has proliferated since the 1990s and has

contributed to numerous problems,” reads the text of New York’s bill.

“Anonymous shell companies are used to bypass sanctions, avoid taxes, fund terrorist organizations and organized crime and launder money. Anonymous LLCs leasing real property are correlated with more numerous code violations, higher rents and more evictions compared to non-corporate owners. Drug and human traffickers use anonymous shell companies like LLCs to launder the proceeds of their criminal activities and evade detection. Deed theft, campaign finance violations, and bid rigging can be facilitated by anonymous LLCs … The anonymous ownership of a significant portion of real estate in New York hampers policymaking and upends centuries of precedent” regarding ownership.

The NYLTA was initially aligned with the federal CTA, sharing its definitions for “reporting company” and “beneficial owner.” It also uses the same 23 categories of exemption (generally large operating companies, inactive entities, banks, credit unions, holding companies and securities brokers or dealers, among others). After March, the New York Legislature passed Senate Bill S8432 to ensure the NYLTA remains effective under state law. That bill awaits final action when the legislature reconvenes in January.

The State of New York has not yet issued final implementation guidance or released its filing portal. As the effective date approaches, LLC owners should review their structures of ownership, confirm their eligibility for any exemptions.

Despite the obvious need to use all tools to combat money laundering, critics of NYTA maintain that it will hamper the state’s competitiveness and disproportionately burden small businesses. Despite an early rush of interest by other states in the early days of the federal CTA/BOI, New York stands alone with a reporting requirement. Others question if the state is ready for this huge administrative task. Companies should also monitor similar legislative efforts in other states, such as Massachusetts, Pennsylvania and California.

Your tax specialist needs to stay on top of this and many other issues of wealth, foreign income and tax enforcement. If we can help, please let us know.

About the Author 

Alicea Castellanos is the CEO and Founder of Global Taxes LLC. Alicea provides personalized U.S. tax advisory and compliance services to high-net-worth families and their advisors.

Alicea has more than 20 years of experience. Prior to forming Global Taxes, Alicea founded and oversaw operations at a boutique tax firm, worked at a prestigious global law firm and CPA firm.

Alicea specializes in U.S. tax planning and compliance for non-U.S. families with global wealth and asset protection structures which include non-U.S. trusts, estates and foundations that have a U.S. connection.

Alicea also specializes in foreign investment in U.S. real estate property, and other U.S. assets, pre-immigration tax planning, U.S. expatriation matters, U.S. persons in receipt of foreign gifts and inheritances, foreign accounts and assets compliance, offshore voluntary disclosures/tax amnesties, FATCA registration, and foreign companies wanting to do business in the U.S.

Alicea is fluent in Spanish and has a working knowledge of Portuguese.

Alicea is an active member of the Society of Trusts & Estates Practitioners (STEP), the New York State Society of Certified Public Accountants (NYSSCPAs), the American Institute of Certified Public Accountants (AICPA), the International Fiscal Association (IFA), a member of Clarkson Hyde Global, a world-wide association of accountants, auditors, tax specialists and business advisors and the Global Referral Network (GRN).

Distinctly, in 2020, Alicea was awarded with a prestigious NYSSCPA Forty Under 40 Award. She was selected as someone that has notable skills and is visibly making a difference in the accounting profession.

In 2021 and 2022, Alicea was the Gold and Silver Winner, respectively, of Citywealth’s Powerwomen Awards in the category USA – Woman of the Year – Business Growth (Boutique). In 2023, she continued her winning streak by receiving the Gold award for Company of the Year Female Leadership (Boutique) and the Silver award for Accountancy Firm of the Year at the Magic Circle Awards. Furthermore, Alicea has consistently secured her position in the Global Elite Directory for four consecutive years, being recognized as a Private Client Global Elite Advisor and is currently listed for 2024 as a Non-Legal Adviser. This exclusive directory annually highlights the world’s elite lawyers and outstanding wealth advisors serving ultra-high net-worth clients.

Please note: This content is intended for informational purposes only and is not a replacement for professional accounting or tax preparatory services. Consult your own accounting, tax, and legal professionals for advice related to your individual situation. Any copy or reproduction of our presentation is expressly prohibited. Any names or situations have been made up for illustrative purposes — any similarities found in real life are purely coincidental.