August 16, 2023
Bloomberg’s Daily Tax Report
By: Bradley Kulman, Karen Scanna
If signed into law by New York Governor Kathy Hochul, a bill—known as the LLC Transparency Act—will amend the New York Limited Liability Company Law to require disclosure of beneficial owners of a limited liability company formed, or qualified to do business, in New York, a report which, for the first time, would be made available on a public database maintained by the state. This new bill builds off of the federal Corporate Transparency Act (CTA), requiring a broad range of businesses to disclose their beneficial owners to the Treasury Department starting next year (see previous Stroock Client Alerts on the CTA here and here). The LLC Transparency Act will allow those with “significant privacy interests” an option to apply for a waiver to not appear in the state registry and companies failing to comply for more than two years would be shown as “delinquent” on state records and subject to a $250 penalty. Both attorneys and tax practitioners worry its effectiveness could be hampered by a low penalty structure and the possibility of workarounds.
Partners Bradley Kulman and Karen Scanna recently spoke with Bloomberg’s Daily Tax Report. Scanna stated “[o]ur feeling is that people are going to err on not complying because the penalty is so low, and the downside is so large.”
The pair speculates that some LLCs may “try to structure around” New York’s requirements by becoming a limited partnership or another entity not targeted by the legislation. That would be “virtually impossible” to do under the Corporate Transparency Act, because most business entities will be subject to the federal requirements.
Kulman and Scanna continue to track the LLC Transparency Act, having previously issued the Stroock Client Alert, Additional Ownership Disclosure Requirements for New York LLCs if New Act Becomes Law.
Read the article in Bloomberg’s Daily Tax Report here. [Subscription required].
August 16, 2023
Bloomberg’s Daily Tax Report
By: Bradley Kulman, Karen Scanna
If signed into law by New York Governor Kathy Hochul, a bill—known as the LLC Transparency Act—will amend the New York Limited Liability Company Law to require disclosure of beneficial owners of a limited liability company formed, or qualified to do business, in New York, a report which, for the first time, would be made available on a public database maintained by the state. This new bill builds off of the federal Corporate Transparency Act (CTA), requiring a broad range of businesses to disclose their beneficial owners to the Treasury Department starting next year (see previous Stroock Client Alerts on the CTA here and here). The LLC Transparency Act will allow those with “significant privacy interests” an option to apply for a waiver to not appear in the state registry and companies failing to comply for more than two years would be shown as “delinquent” on state records and subject to a $250 penalty. Both attorneys and tax practitioners worry its effectiveness could be hampered by a low penalty structure and the possibility of workarounds.
Partners Bradley Kulman and Karen Scanna recently spoke with Bloomberg’s Daily Tax Report. Scanna stated “[o]ur feeling is that people are going to err on not complying because the penalty is so low, and the downside is so large.”
The pair speculates that some LLCs may “try to structure around” New York’s requirements by becoming a limited partnership or another entity not targeted by the legislation. That would be “virtually impossible” to do under the Corporate Transparency Act, because most business entities will be subject to the federal requirements.
Kulman and Scanna continue to track the LLC Transparency Act, having previously issued the Stroock Client Alert, Additional Ownership Disclosure Requirements for New York LLCs if New Act Becomes Law.
Read the article in Bloomberg’s Daily Tax Report here. [Subscription required].
