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Regulatory Hot Topics

Upcoming Financial Reporting Requirements Will Apply to LLCs

Operators of business aircraft owned in limited liability companies (LLCs) and similar entities will soon be required to comply with the Corporate Transparency Act (CTA), which mandates additional reporting to government agencies in an effort to combat domestic and international financial crimes.

For many business aircraft owners, LLCs are utilized to establish leases under which companies may share aircraft for FAA compliance and a host of other business reasons. However, in passing the CTA, Congress noted that LLCs and other ownership structures may also be used to shield illicit financial transactions.

The CTA authorizes the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to request from LLCs and other entities so-called “ultimate beneficial-owner information” – including name, date of birth, current address and a unique ID number.

Although the FinCEN database will not be accessible to the public, given the prevalence of LLCs and similar ownership structures in aviation, the CTA nevertheless poses potential privacy concerns. NBAA has joined with GAMA to submit comments on the pending implementation of the CTA.

“For corporate and industrial security reasons, it is critical that beneficial ownership information is maintained in a confidential, secure and non-public database,” the comments noted. “We trust that FinCEN will keep data security at the forefront as this system is developed.”

Scott O’Brien, NBAA senior director for public policy and advocacy, said the association supports the goals of the CTA, but he also emphasized the need for common ground.

“Collaboration between the FAA and FinCEN on standards for beneficial-ownership reporting will be critical to ensuring that the aviation industry has a clear set of reporting requirements,” he said. “We look forward to working with FinCEN on a system that takes into account business aviation concerns.”

“Collaboration between the FAA and FinCEN on standards for beneficial-ownership reporting will be critical to ensuring that the aviation industry has a clear set of reporting requirements.”

Scott O'Brien Senior Director for Public Policy and Advocacy, NBAA

NBAA and GAMA also noted that such collaboration would help prevent conflicts or duplication of information reported to FinCEN and the FAA’s upcoming modernized aircraft registry. Both associations encouraged FinCEN to consider the industry as a unique stakeholder as CTA regulations are developed.

“Your direct outreach to our community through groups like GAMA and NBAA will be critical as final regulations are implemented to ensure awareness and understanding,” the comments noted. “Adequate notification and transition periods to comply with the final reporting requirements will also be necessary,

particularly for entities unfamiliar with reporting requirements under the CTA and engagement with FinCEN.”

Final regulations governing ultimate beneficial-ownership reporting requirements are expected to be published by Jan. 1, 2022. The effective date for those requirements remains to be determined.

Industry Challenge

The Corporate Transparency Act (CTA) will include new government reporting requirements to help investigate financial crimes, but it also raises privacy concerns with many commonly utilized business aircraft ownership structures.

NBAA Response

NBAA and GAMA are calling for a focus on privacy protections and collaboration with the FAA and Treasury Department to ensure an understanding of how the CTA will apply to business aviation.

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