This update provides critical information regarding recent developments concerning the Financial Crimes Enforcement Network's (FinCen) implementation of the Corporate Transparency Act (CTA). On March 21, 2025, FinCen issued an interim final rule that significantly alters the scope of the beneficial ownership information (BOI) reporting requirements. These changes are effective immediately upon publication in the Federal Register.
Key Changes Introduced by the Interim Final Rule:
- Exemption for U.S. Companies and Persons: The most significant change is the removal of the requirement for U.S. companies and U.S. persons to report beneficial ownership information to FinCen. This means that entities created or registered in the United States (previously referred to as "domestic reporting companies"), and their beneficial owners, are now exempt from the BOI reporting requirements. This includes the obligation to file initial reports, as well as updates or corrections to previously filed reports.
- Revised Definition of "Reporting Company": The definition of a "reporting company" has been revised to include only those entities that are formed under the law of a foreign country and registered to do business in any U.S. state or Tribal jurisdiction by the filing of a document with a secretary of state or similar office. Essentially, the definition now aligns with what was previously termed a "foreign reporting company."
- BOI Reporting Exemption for U.S. Persons as Beneficial Owners of Foreign Reporting Companies: Foreign reporting companies are no longer required to report beneficial ownership information of any beneficial owners who are U.S. persons (as defined in the Internal Revenue Code). Consequently, U.S. persons are not required to report BOI to any such foreign reporting company for which they are a beneficial owner.
- Reporting Requirements for Foreign Reporting Companies: Foreign entities that meet the revised definition of a "reporting company" and do not qualify for any other exemptions are still required to report their BOI to FinCen. However, they are not required to report information about their beneficial owners who are U.S. persons. Therefore, a foreign reporting company with only U.S. person beneficial owners would only need to report information about the entity itself (e.g., name, address, jurisdiction of organization) and its company applicants, if applicable, without providing BOI for any individuals.
- New Reporting Deadlines for Foreign Reporting Companies: The interim final rule establishes new deadlines for foreign reporting companies:
- Existing Foreign Reporting Companies: Foreign reporting companies that were registered to do business in the U.S. before the date of publication of the interim final rule in the Federal Register must file their initial BOI reports no later than 30 days after the date of publication.
- New Foreign Reporting Companies: Foreign reporting companies that register to do business in the U.S. on or after the date of publication of the interim final rule have 30 calendar days from the date they receive notice that their registration is effective to file their initial BOI report.
- No Enforcement for Domestic Entities: FinCen has indicated that it will not enforce any BOI reporting penalties or fines against U.S. citizens, domestic reporting companies, or their beneficial owners.
Rationale for the Changes:
FinCen stated that these changes reflect a reassessment of the balance between the regulatory burden imposed by the original BOI reporting requirements on the American public and the usefulness of collecting such information. The interim final rule aims to alleviate unnecessary burdens on U.S. companies and individuals.
Next Steps and Considerations:
- The interim final rule is effective upon publication in the Federal Register.
- FinCen is accepting comments on the interim final rule for 60 days following its publication and intends to issue a final rule later this year. This indicates that further modifications to the rules are possible.
- While the BOI reporting requirements are now significantly narrowed, entities formed under foreign law and registered to do business in the U.S. must still comply with the new reporting obligations and deadlines.
- Our firm is closely monitoring these developments and will provide further updates as they become available. We are prepared to assist foreign entities in understanding their obligations under these new rules and ensuring compliance.
What This Means for Our Clients:
- U.S.-based entities and their beneficial owners generally no longer have a BOI reporting obligation under the Corporate Transparency Act. If your company was formed or registered in the United States, you are likely exempt from these requirements.
- If your entity is formed under the laws of a foreign country and is registered to do business in a U.S. state or Tribal jurisdiction, you will likely still have BOI reporting obligations. Please contact us to determine your specific requirements and applicable deadlines.
We understand that these changes are significant and may raise questions. Please do not hesitate to reach out to us if you require clarification or assistance in navigating these new regulations.
For More Information:
- If you have any questions about this Alert, please contact Richard Devlin, Sharda Balaji, any of the attorneys in our Corporate and Commercial Law Advisory Group, or the attorney in the firm with whom you are regularly in contact. See also the FinCEN Small Entity Compliance Guide.
- Disclaimer: This memo is intended for general informational purposes only and does not constitute legal advice. Please consult with an attorney to discuss your specific situation and legal obligations under the CTA.
- Please note: This is a general memo and may not address all aspects of the CTA or its implications for your specific business. It is important to consult with an attorney to discuss your individual circumstances and ensure compliance with the Act.