With Focus on Tax Evasion, New York Enacts an LLC Transparency Act

On December 23, 2023, Governor Hochul signed the New York Limited Liability Company Transparency Act (“NY LTA”) into law. The NY LTA is intended to tackle tax evasion and financial crimes. Specifically, New York’s State Senator Brad Hoylman-Sigal noted that the law will help “to crack down on tax cheats, bad landlords, and employers engaged in wage theft in New York.” Pursuant to the legislation, New York will create a database that discloses the beneficial ownership of limited liability companies (LLCs). The ownership information can be accessed by federal, state, and local government law enforcement across New York State. Owners who set up, or already have ownership of LLCs and meet the requirements for disclosure, will be required to identify the names of the beneficial owner(s) in the filing, unless a reporting exemption applies.

Summary of Requirements

• The effective date of the NY LTA is January 1, 2026.
• A domestic or foreign LLC that is not otherwise defined as a "reporting company" under 31 U.S.C. § 5336(a)(11) and meets a condition for exemption under 31 U.S.C. § 5336(a)(11)(B) is exempt from the requirements.
• Such exempt entities include but are not limited to banks, credit unions, brokers and dealers, investment advisors, insurance companies.

• Exempt entities must still, under penalty of perjury, file an attestation of exemption in such form as designated by the NYS department of state. The attestation must include the specific exemption claimed and the facts providing basis for the claim.
• Note: NY LTA adopts the same 23 exemptions from the reporting requirements in line with the federal CTA rules.
• Non-exempt (reporting) entities must file a beneficial ownership disclosure in such form and manner as directed by the department of state. The disclosure must identify each beneficial owner and each of applicant with respect to the reporting company by:
• Full legal name
• Date of birth
• Current home or business street address
• A unique identifying number such as a passport or driver's license

• Beneficial owner information as filed with the NY department of state is deemed confidential except under:
• Written request or voluntary consent of the owner(s)
• Court order
• The need of officers or employees of another federal, state, or local government for the performance of official duties as required by law
• A valid law enforcement purpose, including any law enforcement investigation conducted by the office the attorney general
• All disclosures and attestations must be submitted electronically as prescribed by the department of state.
• Both reporting and exempt entities must file their respective documentation within 30 days of an initial filing of articles of organization or application for authority. Additionally, all previously formed and authorized entities must file their respective documentation within one year of the effective date of the legislation (January 1, 2026).
• After initial disclosure, all entities must electronically file an annual statement confirming or updating their beneficial ownership disclosure information, the street address of its principal executive officer, exempt status if applicable, and other information as designated by the department of state.
• Consideration of beneficial ownership updates under NYLTA may also be triggered by important events, such as a change of control upon the closing of a merger, acquisition, or other transaction involving the LLC (or the LLC’s beneficial owners); or a dissolution of the LLC for any life events, including upon the LLC’s dissolution and substitution of a new member. This may include a succession by operation of law (e.g., due to death or bankruptcy).

Penalties

• Reporting and exempt entities that fail to file their required disclosure for a period exceeding thirty (30) days may be fined up to $500 per day they remain in noncompliance.
• Any reporting or exempt entity that fails to file its required disclosures shall be deemed suspended and shall not conduct business in New York State until its beneficial ownership disclosure or attestation of exemption has been filed, at which point the suspension shall be deemed annulled. The state will provide at least 30 days' notice prior to suspension. For an entity to be reinstated, there is a one-time $250 fine that must be paid once the disclosure/attestation is filed and the attorney general has verified that any outstanding penalties have been paid.
• The New York State attorney general has authority to bring action to dissolve or cancel an LLC that is more than two years delinquent in filing its required disclosures or that has submitted false or fraudulent disclosure information.

Key differences between NY LTA vs. Federal CTA