Key Takeaways:
- Exemption for Domestic Reporting Companies: Domestic reporting companies are now exempt from the requirement to file beneficial ownership information ("BOI") reports under the Corporate Transparency Act ("CTA").
- Exemption for Foreign Reporting Companies with beneficial owners who are all U.S. persons: Foreign reporting companies are exempt from reporting the BOI of U.S. persons who are beneficial owners, and U.S. persons are exempt from providing such information.
- Extended Deadlines for Foreign Reporting Companies: Foreign reporting companies who have non-U.S. person beneficial owners have until April 25, 2025, to file initial BOI reports or update/correct previously filed reports.
On March 21, 2025, the Financial Crimes Enforcement Network ("FinCEN") of the U.S. Department of the Treasury issued an interim final rule ("IFR") revising the BOI reporting requirements under the Corporate Transparency Act (CTA). This rule introduces significant changes to the existing reporting framework, primarily affecting domestic reporting companies. The IFR follows a February 27, 2025 announcement from FinCEN that it would not issue any fines or penalties or take any other enforcement actions against reporting companies based on a failure to file or update BOI reports pursuant to the CTA by the then-current March 21, 2025 filing deadline. Instead, FinCEN promised to issue an interim final rule by March 21, 2025, which it did late in the day on March 21, 2025. The IFR is scheduled to be published in the Federal Register on March 26, 2025, and is effective immediately upon publication.
Exemption for Domestic Reporting Companies
Under the new rule, entities previously defined as "domestic reporting companies" are exempt from the requirement to file BOI reports with FinCEN. In its commentary accompanying the IFR, FinCEN stated that this exemption also applies to the requirement to update or correct previously filed BOI reports. FinCEN did so by exempting all domestic reporting companies pursuant to the authority Congress granted to FinCEN to create additional reporting exemptions beyond the 23 exemptions provided for the in CTA itself (see 31 U.S.C. 5336(a)(11)(B)(xxiv)). The Trump administration had previously signaled it wanted to reduce the compliance burdens imposed by the CTA on small businesses and other domestic entities. The IFR addresses concerns raised by small businesses and other stakeholders and also generally aligns with the Administration's policy to reduce regulatory burdens. As a result of the IFR, domestic companies currently have no reporting obligations under the CTA.
Impact on Foreign Reporting Companies
Only foreign companies that were formed under the law of a foreign country and registered to do business in the U.S. by the filing of a document with a secretary of state or a similar office under the laws of a State or Indian Tribe remain subject to filing obligations under the CTA (U.S. subsidiaries of foreign entities would be considered exempt domestic reporting companies). Here too, however, 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. Foreign reporting companies that only have beneficial owners that are U.S. persons will be exempt from the requirement to report any beneficial owners.
Foreign pooled investment vehicles must report the BOI of any individual who exercises substantial control over the entity if that individual is not a U.S. person. If more than one individual exercises substantial control over the entity and at least one of those individuals is not a U.S. person, the entity must report BOI with respect to the individual who is not a U.S. person who has the greatest authority over the strategic management of the entity. If there is no individual with substantial control who is not a U.S. person, the foreign pooled investment vehicle is not required to report any beneficial owners.
No other changes were made to the beneficial ownership rule as to foreign reporting companies, but the time for such entities to submit initial beneficial owner reports (or update or correct previously filed reports) has been extended by 30 days from the date of publication of the IFR in the Federal Register (publication is expected on March 26, 2025, which would mean the new reporting deadline is April 25, 2025). This extension provides additional time for foreign entities to comply with the reporting requirements.
Next Steps:
FinCEN is accepting comments on the IFR for 60 days after publication of the rule in the Federal Register and will assess the exemptions in light of the feedback received. It intends to issue a final rule later this year. Stakeholders are encouraged to submit their comments to ensure their perspectives are considered in the final rulemaking process.
Efforts in Congress to repeal the CTA continue. In addition, numerous court challenges to the CTA continue to work their way through various federal district and appellate courts and may ultimately reach the U.S. Supreme Court again. It is possible, however, that the Trump administration may seek to dismiss such challenges for lack of standing now that the IFR exempts domestic reporting companies, who constitute the plaintiffs in the pending challenges. However, new court challenges to the IFR may emerge from members of Congress or private organizations concerned that the IFR is contrary to the language and intent of the CTA. Reporting companies should continue to monitor developments in the courts and in Congress.
Foreign reporting companies who are not otherwise exempt should continue to prepare their BOI reports to be able to comply with the anticipated April 25, 2025 reporting deadline. Foley Hoag reminds non-exempt reporting companies that once an initial filing is made, reporting companies assume an ongoing obligation to notify FinCEN of changes to BOI information (once enforcement of the CTA is reinstated).
Newly exempt companies may wish to comment, or seek additional guidance from FinCEN, on what will happen to BOI already submitted to FinCEN.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
