Michael Walker, Samuels Yoelin Kantor LLP
The Corporate Transparency Act (CTA) is a federal statute that was incorporated with some amendments into the National Defense Authorization Act for fiscal year 2021, was passed over a presidential veto, and was effective as of January 1, 2021. The act seeks to harmonize the disparate beneficial ownership reporting laws of the states into one federal system. In theory, a central database containing beneficial ownership information of U.S. business entities will allow the federal government to better combat money laundering and the financing of terrorism. The federal agency tasked with enforcing the CTA is the Financial Crimes Enforcement Network (FinCEN). The Oregon Business Lawyer has published several articles on the CTA, its implementation, and subsequent litigation over the constitutionality of the CTA.
Now, in 2025, the direction of the CTA has taken an abrupt turn. Following several lawsuits that had temporarily enjoined FinCEN from enforcing the CTA, FinCEN extended the reporting deadlines for most reporting companies until March 21, 2025. In addition, FinCEN announced that during the thirty-day extension period, it would “assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks.” On March 2, 2025, the Treasury Department announced the suspension of enforcement of the CTA against U.S. citizens, domestic reporting companies, and their beneficial owners, and further announced its intent to engage in a rulemaking to narrow the reporting rule to foreign reporting companies only.
The interim final rule issued by FinCEN
Following that announcement, on March 21, 2025, FinCEN issued an interim final rule (the IFR) that limits the definition of a “reporting company” under the CTA to include only non-U.S. companies and their non-U.S. beneficial owners. In describing its rationale for issuing the IFR, FinCEN stated:
As the preamble to the Reporting Rule states, “[s]mall businesses are a backbone of the U.S. economy, accounting for a large share of U.S. economic activity, and driving U.S. innovation and competition.” The vast majority of domestic small businesses are legitimate and owned by hard-working American taxpayers who are not engaged in illicit activity. The Secretary [of the Treasury] has assessed that exempting them would ensure that the Reporting Rule is appropriately tailored to advance the public interest, considering the burdens imposed by the regulations without sufficient benefits. The Attorney General and the Secretary of Homeland Security have concurred that collecting BOI [beneficial ownership information] from domestic reporting companies would not be “highly useful in national security, intelligence, and law enforcement agency efforts.
The text of the IFR provides for this change by redefining the term “reporting company” at 31 CFR 1010.380(c) to remove the previously defined term “domestic reporting company” at 31 CFR 1010.380(c)(1)(i). By taking this step, any entity that meets the definition of the previously defined term “domestic reporting company” is no longer within the scope of the reporting rule and therefore is no longer required to file BOI reports with FinCEN.
In addition, the IFR exempts foreign reporting companies, and their U.S. person beneficial owners, from the requirement to provide the BOI of any U.S. persons who are beneficial owners of the foreign reporting company. As such, foreign reporting companies that only have beneficial owners that are U.S. persons will be exempt from the requirement to report any beneficial owners.
So, what BOI reporting requirements remain after the IFR? The IFR retains the requirement for foreign reporting companies and their beneficial owners (excluding U.S. persons) to report their BOI to FinCEN. It has extended the deadline for those companies to file initial BOI reports, or update or correct previously filed BOI reports, to thirty days after the date of the publication of the IFR (i.e., March 26, 2025) or thirty days after their registration to do business in the U.S., whichever comes later.
In addition, the introductory portion of the IFR stated that FinCEN was accepting comments on the IFR and will assess the exemptions, as appropriate, considering those comments. FinCEN intends to issue a final rule this year. Comments on the IFR were due on May 27, 2025.
The future of the CTA
It is difficult to assess the future of the CTA at this point. FinCEN could reverse its position expressed in the IFR, although this is unlikely based upon the rationale described in the IFR. It is also possible that additional litigation could develop regarding whether FinCEN exceeded its statutory authority under the CTA when it issued the IFR. While Congress could act to repeal the CTA or attempt to override the IFR, at this time there does not appear to be significant momentum in Congress for either action. Hence, for the time being, attorneys advising foreign reporting companies will still need to watch the developments from FinCEN and the possible issues that could impact the substantive requirements and procedures for CTA reporting. For attorneys advising domestic reporting companies, the IFR gives sufficient authority to advise clients that CTA reporting is not currently required, at least until FinCEN issues a “final” rule that changes those requirements. ♦