Important information about federal financial compliance requirements that affect real estate transactions, including the Corporate Transparency Act and Geographic Targeting Orders.
The Corporate Transparency Act (CTA), enacted as part of the Anti-Money Laundering Act of 2020, requires many companies operating in the United States to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.
The CTA is designed to combat money laundering, terrorist financing, tax fraud, and other illicit activities that exploit the anonymity provided by shell companies and complex corporate structures. By requiring beneficial ownership disclosure, the law aims to increase transparency in business formations and reduce the misuse of legal entities in financial crimes.
This legislation has significant implications for the real estate industry, where legal entities such as LLCs and corporations are commonly used to hold title to property. Understanding these requirements is essential for anyone involved in buying, selling, or investing in real estate.
What you need to know about BOI reporting requirements under the Corporate Transparency Act.
Under the CTA, a beneficial owner is any individual who directly or indirectly exercises substantial control over the reporting company, or who owns or controls at least 25% of the ownership interests of the company. This includes senior officers such as CEOs, CFOs, general counsel, and any other individual who has the authority to make important decisions on behalf of the company.
Most domestic corporations, LLCs, and other entities created by filing a document with a state secretary of state or similar office must file BOI reports with FinCEN. Foreign entities registered to do business in the United States are also subject to reporting requirements. This includes the many LLCs and corporations commonly used in real estate ownership and investment.
The CTA provides 23 categories of exemptions, primarily for entities that are already subject to substantial federal or state regulation. Exempt entities include publicly traded companies, banks, credit unions, insurance companies, tax-exempt organizations, and large operating companies (those with more than 20 full-time employees, more than $5 million in gross revenue, and a physical presence in the United States). Most small LLCs and corporations used to hold real estate do not qualify for an exemption.
Reporting companies must provide the following for each beneficial owner: full legal name, date of birth, current residential or business address, and a unique identifying number from an acceptable identification document (such as a driver's license, state ID, or passport), along with an image of that document. Companies must also report their own legal name, any trade or "doing business as" names, their address, the state or tribal jurisdiction of formation, and their IRS Taxpayer Identification Number.
Companies created or registered before January 1, 2024, had until January 1, 2025, to file their initial BOI reports. Companies created or registered on or after January 1, 2024, must file within 90 days of receiving notice that their creation or registration is effective. Any changes to previously reported information must be updated within 30 days of the change. Note: filing deadlines are subject to change based on evolving federal guidance and court rulings. Consult legal counsel for the most current requirements.
How FinCEN's targeting orders affect all-cash real estate transactions.
Geographic Targeting Orders are directives issued by FinCEN that require U.S. title insurance companies to identify the natural persons behind legal entities (such as LLCs, corporations, partnerships, and trusts) used to make all-cash purchases of residential real estate. GTOs were first issued in 2016 for select metropolitan areas and have since been expanded to cover the entire United States.
When a legal entity purchases residential real estate without a mortgage (an all-cash purchase) above a certain threshold, the title insurance company is required to collect and report identifying information about the beneficial owners of the purchasing entity to FinCEN. As the title agency, First Source Title is responsible for gathering this information and filing the required reports. This may require additional documentation from the buyer before closing can proceed.
The current nationwide GTO applies to all-cash residential real estate purchases of $300,000 or more made by legal entities. The threshold may vary, and FinCEN periodically updates the GTO terms. Title companies must collect the name, date of birth, and taxpayer identification number of each beneficial owner of the purchasing entity, as well as details of the transaction itself.
If you are purchasing residential real estate through an LLC, corporation, trust, or other legal entity without financing, be prepared to provide identification and ownership details for all beneficial owners. This information is kept confidential by the title company and FinCEN and is used solely for law enforcement and regulatory purposes. Having this documentation ready in advance helps avoid delays at closing.
What to expect when FinCEN compliance is part of your transaction.
If your transaction involves a legal entity, you may be asked to provide articles of organization, operating agreements, and government-issued identification for all beneficial owners. Gathering these documents early in the process prevents last-minute delays.
Compliance verification may add one to three business days to the closing timeline. Our team works to complete these reviews as efficiently as possible while ensuring full compliance with federal requirements.
All beneficial ownership information collected by First Source Title is handled with the strictest confidentiality. This data is transmitted securely to FinCEN and is not shared with other parties in the transaction or the public.
First Source Title maintains rigorous anti-money laundering (AML) and compliance programs. Our team stays current on all FinCEN directives, and we provide guidance to our clients on meeting their obligations throughout the closing process.
Official government resources for further information on FinCEN requirements.