USA – CALIFORNIA Law and Practice Contributed by: Jennifer Jordan McCall, Ashley Huh and Matthew Perotti, Pillsbury Winthrop Shaw Pittman LLP
The United States Corporate Transparency Act As of 1 January 2024, California corporations, lim - ited liability companies, and other entities which were registered to do business in the United States were subject, unless one of the 23 exemptions applied, to reporting requirements of the Corporate Transparency Act. Entities were required to electronically report ben - eficial ownership information (BOI) about individual persons who directly or indirectly own or control the entity to the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). A “beneficial owner” is “any individual who, directly or indirectly, either exercises substantial control over such report - ing company or owns or controls at least 25 per cent of the ownership interests of such reporting compa - ny.” BOI is not public, but FinCEN will disclose BOI to US, state, local, Tribal, and foreign officials for national security, intelligence, and law enforcement related purposes. Financial institutions may have access to BOI with the consent of the reporting company. The primary purpose of the CTA is to combat money laun - dering, drug trafficking, terrorism, and corruption. Companies created or registered to do business in the US before 1 January 2024 were required to file a BOI report by 1 January 2025. Companies created or registered after 1 January 2024 had 90 days after notice of creation to file. A reporting company created or registered after 1 January 2025 had 30 days. Generally, non-exempt reporting entities were also required to report the name, date of birth, address, and upload an image of an unexpired identity docu - ment for each beneficial owner of the entity. The entity was also required to report its name, address, and for entities created after 1 January 2024, information about who formed the company. In FinCEN’s ongoing efforts for gatekeeper compliance, legal counsel and staff who assisted in the formation of the company may fall within the definition of company applicants who are required to report. On 26 March 2025, the Department of Treasury issued an interim final rule which exempts domestic entities from any BOI reporting requirements. Foreign entities are still subject to BOI reporting requirements but do not have to report the BOI for beneficial owners who are US persons.
sion of the bill seeking to tax extreme wealth has been introduced multiple times. Some versions include an “exit tax,” seeking to collect the wealth tax even after a taxpayer relocates to a new residence outside Cali - fornia. This has caused some uncertainty, and may be one factor for private wealth clients to establish residency outside California. Another factor is the very high state income tax rates in California compared with other states, such as Nevada, Wyoming and Florida, which have a zero income tax rate. 1.6 Transparency and Increased Global Reporting The United States is not a signatory to the OECD’s CRS. California-based entities with business units that engage in multinational tax arrangements between any EU country and the US must comply with the EU DAC 6. FATCA and FinCEN Under FATCA US/California entities, individuals, insti - tutions, and trusts who hold financial assets outside the US and meet the income tax reporting threshold are required to report the assets on IRS Form 8938. In 2025, the reporting threshold ranges from USD50,000 to USD150,000 for individuals living in the US and USD200,000 to USD600,000 for individuals living out - side the US. In addition, if a US person, resident alien, trust, estate, or domestic entity has a financial interest in or sig - natory authority over an offshore financial account, the account must be reported on FinCEN Form 114, Report of Foreign Bank and Financial Accounts, or FBAR. The information requested on each form is dif - ferent, thus due to the different rules and differences in the definition of “financial account,” not every tax - payer will need to file both forms or report the same foreign financial accounts. Reporting is required if the aggregate value of any one or more financial accounts exceeds USD10,000 at any time during the calen - dar year. Notably, residents of US territories are not included in the definition of “United States” for Form 8938 reporting, while resident aliens of US territories and US territory entities are subject to FBAR reporting.
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