FinCEN Narrows CTA Reporting Requirements
On March 21, 2025, the Financial Crimes Enforcement Network (FinCEN) issued an interim final rule to significantly narrow the applicability of the Corporate Transparency Act (CTA) reporting rule to apply solely to foreign entities. Accordingly, entities formed in the United States are no longer considered reporting companies and are not required to report their beneficial owners to FinCEN.
This interim final rule follows a statement published on March 2, 2025 from the U.S. Department of the Treasury explaining its intent to revise the definition of “reporting company” to narrow its scope to foreign entities only and announcing that it will not enforce any fines or penalties against any U.S. citizens or domestic reporting companies that fail to submit beneficial ownership information (BOI) reports pursuant to the CTA.
Updated Definition of “Reporting Company”
Under the interim final rule, the definition of “reporting company” is now limited to entities formed under the laws of a foreign country that are registered to do business in the United States by the filing of a document with a secretary of state or similar offices.
To underscore its effort to provide the same broad relief to U.S. persons, FinCEN also clarified that if a foreign entity meeting the new definition of a reporting company is owned or controlled by a U.S. person, then that U.S. person is exempt from reporting. Instead, only non-U.S. persons that meet the definition of a beneficial owner would be required to report. The same is true for a U.S. person who exercises substantial control over a foreign pooled investment vehicle. Rather than reporting the U.S. person, the foreign pooled investment vehicle would report the non-U.S. person who has the greatest authority over its strategic management, if one exists. If the only individuals exercising substantial control are U.S. persons, then the entity does not need to report any beneficial owners to FinCEN.
New BOI Filing Deadlines Announced
Along with the interim final rule comes new filing deadlines:
- Existing reporting companies: Existing reporting companies have 30 days from the interim final rule’s publication date of March 26, 2025, meaning April 25, 2025, to file initial BOI reports.
- New reporting companies: On or after March 26, 2025, new reporting companies have 30 days from the date the applicable secretary of state or similar office first provides public notice that the foreign entities are registered to do business in the United States to file initial BOI reports.
FinCEN stated that the interim final rule is effectively immediately, and interested parties have 60 days to provide comments to FinCEN, which could potentially lead to changes and subsequent requests for more comments before a final rule is issued later this year.
The unfolding of the CTA is likely to further evolve, especially as the CTA is still the subject of multiple legal challenges in the courts, and it remains to be seen what sort of congressional action will follow the interim final rule. While it is certainly a welcome relief to be able to suspend CTA reporting activities for the great majority of entities that previously faced compliance obligations, U.S. businesses should continue to pay attention to additional developments in connection with the CTA.
If you have questions regarding the status of the CTA or any ongoing legal developments surrounding the CTA, reach out to KJK’s CTA task force at CTA@kjk.com.