Publication
Corporate Transparency Act Update: A Reprieve for U.S. Companies
On March 21, 2025, the Financial Crimes Enforcement Network (FinCEN) issued a new interim final rule (the New Rule) limiting the scope of companies that must comply with beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (CTA) and setting new deadlines for companies that must still file BOI reports. The New Rule supersedes the BOI Reporting Rule that was issued by FinCEN in September 2022 (the Prior Rule). Most significantly, the New Rule removes the requirement for U.S. companies (i.e., corporations or other legal entities formed in the U.S.) and U.S. persons to undertake BOI reporting under the CTA.
New Rule
Consistent with the Treasury Department’s March 2, 2025 announcement, under the New Rule, all entities created in the United States, including those previously defined as “domestic reporting companies,” are exempted from BOI reporting obligations and do not need to file a BOI Report nor update or correct a BOI report that was previously filed with FinCEN.
With limited exceptions, the New Rule does not change the existing requirement for entities previously defined as “foreign reporting companies”1 to file BOI reports. However, the New Rule exempts foreign reporting companies from having to report the BOI of any U.S. persons who are beneficial owners, and exempts U.S. persons from having to provide such information to any foreign reporting company for which they are a beneficial owner. The New Rule goes on to state that if a foreign reporting company only has beneficial owners that are U.S. persons, then the company is exempt from reporting BOI.
New Deadlines for “Foreign Reporting Companies”
The New Rule also extends the deadline for foreign reporting companies to file initial BOI reports, and to update or correct previously filed BOI reports, to 30 days from March 21, 2025, providing additional time for foreign reporting companies to comply.
New Exemption
The New Rule revises the special rule associated with “foreign pooled investment vehicles” to exempt any such entity from having to report BOI information of U.S. Persons who exercise substantial control over it; provided that such entity is operated or advised by a bank, credit union, broker or dealer in securities, investment company or investment adviser, or venture capital fund adviser.
What do These New Developments Mean for CTA Compliance?
As discussed in previous reports, the status of the CTA and compliance with its BOI reporting obligations, has been in flux since December 2024. The New Rule, once finally adopted, will bring certainty as to “domestic reporting companies” no longer being required to file BOI reports.
As of March 21, 2025, foreign reporting companies now have until 30 days from March 21, 2025, to file their BOI reports with FinCEN.
What’s Next
FinCEN is accepting comments on the interim final rule and intends to issue a new final rule later this year. Interested parties may comment on any issue related to the New Rule and must do so on or before May 25, 2025. The public comment process is an important step for interested parties to help shape the final reporting rule to be issued later this year and to preserve the record for future litigation. Courts have previously criticized objectors to new regulations that did not submit a comment during the drafting process. As such, entities and trade organizations should consider submitting such a comment to assist in educating regulators as to either the potential illegality of the proposed rule or the impact (negative or positive) on a business or industry. For example, the government in its filings have downplayed the costs and consequences associated with CTA compliance. Now, entities are in a position to educate FinCEN as to the accuracy of the assertions as to real circumstances. This may help ensure that unintended consequences or errors are not overlooked. These comments help form the administrative record upon which a court may eventually evaluate the new implementation rules and, most importantly, related penalties.
Footnotes
-
A foreign reporting company was defined at 31 CFR 1010.380(c)(1)(ii) as “a corporation, limited liability company, or other entity that is formed under the law of a foreign country and that is registered to do business in the United States by the filing of a document with a secretary of state or equivalent office under the law of a state or Indian tribe.”
About Snell & Wilmer
Founded in 1938, Snell & Wilmer is a full-service business law firm with more than 500 attorneys practicing in 17 locations throughout the United States and in Mexico, including Los Angeles, Orange County, Palo Alto and San Diego, California; Phoenix and Tucson, Arizona; Denver, Colorado; Washington, D.C.; Boise, Idaho; Las Vegas and Reno, Nevada; Albuquerque, New Mexico; Portland, Oregon; Dallas, Texas; Salt Lake City, Utah; Seattle, Washington; and Los Cabos, Mexico. The firm represents clients ranging from large, publicly traded corporations to small businesses, individuals and entrepreneurs. For more information, visit swlaw.com.
