Alerts

Make a List. Check it Twice.

The Office of Foreign Assets Control (OFAC), part of the U.S. Treasury Department, administers and enforces the United States’ trade and economic sanctions programs. The objective is to prevent business activity which directly or indirectly finances terrorist, narcotics, or human trafficking activities. OFAC regulations apply to all U.S. citizens and permanent resident aliens, all persons and entities within the U.S. law and their foreign branches.

The regulations prohibit doing business with anyone included on the lists maintained by OFAC including (i) individuals and entities designated as “Specially Designated Nationals” (SDNs); and (ii) banned countries. The SDN List is updated regularly and can be searched via the U.S. Treasury’s website: https://sanctionssearch.ofac.treas.gov/

In order to ensure compliance, law firms and businesses should check the names of potential and existing customers against the SDN List on a regular basis. If a valid match is determined, OFAC should be contacted as required by law. There are many OFAC reporting and record keeping requirements with which to comply. Failure to do so can result in stiff penalties.

In addition to OFAC regulations, financial organizations are governed by other anti-money laundering laws. Under the Bank Secrecy Act, the USA Patriot Act, and related anti-money laundering laws, banks must develop and maintain risk-based anti-money laundering, customer due diligence, and customer identification programs. Banks must also screen customers against additional government lists and establish a suspicious activity monitoring process.

The Long and Short of it

It’s common to refer to status certificates as “Good Standings” across all 50 states, although their technical name does vary by jurisdiction. There may also be an option to obtain a long form certificate versus a regular certificate. Long Form Good Standing Certificates are, very simply, status certificates that also list the titles and file dates of all corporate documents on file for the entity. Copies do not accompany a Long Form and, if required, must be ordered separately. Of the 33 states that offer Long Forms, many only do so for domestic entities. While the additional information might be preferred to the limited information provided on the standard certificate, Long Forms often take several days to receive and the statutory fees are typically much higher than those for the standard certificate. For more information on what states offer the Long Form or for a proposal of fees, please contact Capitol Services at: info@capitolservices.com

News of the Weird: UCC Edition

Did you know that Georgia doesn’t have a central filing office? Pick your favorite county and your lien will be added to a central indexing system for searching purposes! Same goes for Louisiana parishes.

Did you know that Wyoming has a non-uniform ten-year effective period for their financing statements?

Did you know that Tennessee requires the filer pay a recordation tax in addition to their standard filing fees?

Did you know that Delaware will expedite your UCC filings with a one- hour turnaround for the cool cost of $1,000 in addition to their standard filing fees?

Did you know that South Dakota still requires the inclusion of social security numbers and federal tax IDs on their UCCs? But be careful! It’s illegal to include this information in other jurisdictions!

Did you know that Illinois requires the use of ten-point font on its financing statements?

Did you know that Delaware, New Jersey, North Dakota, West Virginia, Colorado, Mississippi, and Vermont no longer accept paper submissions of UCC filings? These states strictly e-file now.

Did you know that our online UCC Filing Manager remembers all of these oddities so that you don’t have to?

Top 5 UCC Filing Mistakes

5. Not checking the appropriate real estate boxes on fixture filings.
This is especially problematic in the jurisdictions of Louisiana, Georgia, Oklahoma, and D.C. where UCC filings commingle with fixture filings. If you don’t have the appropriate boxes checked and legal descriptions attached, your fixture filings may be indexed as UCC financing statements related to personal property.

4. Missing jurisdiction-specific requirements.
A handful of states require that you include specific language related to collateral or tax requirements and the national UCC form doesn’t prompt you to include this information. Omission, however, can lead to rejection by the filing office.

3. Using outdated forms.
The current national forms revised in 2011 are accepted in all jurisdictions with the exception of New York, while the previous forms are widely rejected. Some states have created their own jurisdiction-specific forms.

2. Filing in the wrong jurisdiction.
For the UCC novice, it’s easy to assume that the jurisdiction for filing is the central filing office in the state indicated in the debtor’s mailing address. The appropriate index for filing with respect to personal property, however, is the central filing office (or index) in the state where the debtor is located. A debtor who is an individual is ‘located’ where they reside while a debtor that is a registered entity is located in the state of organization.

1. Specifying a debtor name that includes additional information or a DBA name.
Additional verbiage beyond the legal name of the entity is liable to cause a hidden lien that would be deemed ineffective. Capitol Services, Inc., a Texas Corporation, would be an inappropriate presentation of a debtor name. Capitol Services, Inc. D/B/A Capitol Corporate Services would also be inappropriate. Keep box 1a limited to the legal name of the entity: Capitol Services, Inc.

Delaware Franchise Taxes

Delaware taxes on domestic corporations can increase more quickly than you expect! What can you do to both lower your liability this year and prevent next year’s taxes from being excessive?

The default method by which the Delaware Secretary of State’s office calculates franchise tax on domestic profit corporations is called the “authorized shares” method – and it is just what it sounds like. If the corporation’s shares have a par value, the tax is calculated based on the number of shares authorized. If the company has 5,000 shares or less, then the company pays the minimum tax of $175. If they have authorized between 5,001 and 10,000 shares, the tax goes up to $250. Thereafter, the tax increases by $75 for each additional 10,000 shares or portion thereof (with a maximum tax of $180,000).

Because a company’s tax is based on the number of shares authorized, the quickest and easiest way to lower your future liability is to amend the Certificate of Incorporation to decrease the number of authorized shares. Companies are often formed with a huge number of shares, when, in reality, they don’t need such a large number.

In order to reduce your liability for the current year, you can try recalculating your taxes using the State’s alternative tax calculation, the “assumed par value capital” method. This calculation takes into account the number of shares issued by the corporation, as well as the gross assets of the company. Because this calculation requires information that the Secretary of State’s office does not have, this can only be done if the company initiates this calculation themselves. If the company has authorized stock with no par value, this calculation will always result in a lower tax balance than the authorized shares method. Note that the minimum tax for the assumed par value capital method is $350.

The Delaware Secretary of State’s office offers a franchise tax calculator that you can use to calculate your taxes using either method at: https://corp.delaware.gov/taxcalc/
For further information, please contact the experts in our Delaware office at 800-316-6660.

LPs and PAs Required to File Public Information Report with Comptroller

Effective January 1, 2016, limited partnerships (LPs) and professional associations (PAs) on which a franchise tax is imposed are required to file a public information report with the Texas Comptroller along with their annual franchise tax returns. This amendment by HB 2891 brings LPs and PAs in line with the requirements for corporations and limited liability companies (LLCs) under the Tax Code. It also removes the secretary of state’s annual statement filing requirement for PAs and periodic report requirement for LPs that are subject to franchise taxes.