Key Takeaways
- On March 21, the Financial Crimes Enforcement Network (FinCEN) issued an interim final rule (IFR) that removes U.S. entities from the definition of “reporting company,” and added a new exemption to expressly exempt U.S. entities from the reporting requirements of the Corporate Transparency Act (CTA).
- As a result, the CTA now imposes reporting requirements on only entities formed outside the U.S. that have directly registered to do business in the U.S.
- Foreign reporting companies will no longer need to report the beneficial ownership information (BOI) of any U.S. citizen under the IFR.
- The new reporting deadline for foreign reporting companies will be the 30th day after the publication of the IFR in the Federal Register.
Interim Final Rule Limits Scope of CTA
On March 21, FinCEN announced an IFR that removes U.S. companies and U.S. citizens from the scope of the reporting requirements under the CTA.
The IFR amends the existing BOI reporting rule previously implemented by FinCEN by:
- Revising the definition of “reporting company” to mean only those entities that are formed under the laws of a foreign country and have registered to do business in the U.S. by filing a document with the secretary of state or a similar office (formerly known as “foreign reporting companies”)
- Adding a 24th exemption to expressly exempt entities formed in the U.S. (previously known as “domestic reporting companies”) from the reporting obligations of the CTA
- Adding an exemption to remove the obligation to report the BOI of any U.S. citizens who are beneficial owners of a reporting company
As a result, the reporting requirements of the CTA retain only a fraction of their original reach. The IFR states that FinCEN expects a mere 20,000 BOI reports to be filed in the first year and 5,000 BOI reports per year thereafter. In the original reporting rule, FinCEN estimated that a total of approximately 32.5 million BOI reports would be filed in the first year and 5 million BOI reports per year thereafter.
In other words, the new definition of “reporting company” captures less than 0.1 percent of the number of entities captured by the original definition.
FinCEN Still Soliciting Comments, Will Issue Final Rule Later This Year
In issuing the IFR, FinCEN took the unusual step of issuing regulations without notice and public comment. According to the adopting rule release, FinCEN determined that a notice and comment period would be impracticable and contrary to public interest. U.S. reporting companies had been facing an updated reporting deadline of March 21, and it would not have been possible for FinCEN to issue a notice and solicit public comments prior to that deadline.
However, FinCEN will still seek public comments on the IFR and will continue to assess the changes set forth therein. FinCEN intends to issue a final rule prior to Jan. 1, 2026.
Reporting Deadlines for Foreign Companies
Upon the publication of the IFR in the Federal Register, existing foreign reporting companies will have 30 days to file their initial BOI report. Going forward, new foreign reporting companies must file their initial BOI report within 30 days after first registering to do business in the U.S.
US Companies Need Not Update or Correct Previously Filed BOI Reports
Under the original reporting rule, reporting companies that later became exempt were required to file an updated BOI report to indicate their status as a newly exempt company. However, FinCEN has confirmed that U.S. companies no longer have any obligation to update or correct previously filed BOI reports. In the adopting rule release, FinCEN stated that with the removal of domestic reporting companies from the definition of “reporting company,” U.S. entities are now entirely outside the scope of the reporting rule, including the obligation to update or correct prior reports.
US Citizens May Still Be Company Applicants
Foreign reporting companies must still provide information on their “applicants,” which refers to (i) the person who actually files the document registering the foreign company in the U.S. and (ii) the person who is primarily responsible for directing or controlling such filing. Unlike with beneficial owners, the IFR does not exempt U.S. citizens from the obligation to provide certain personal information if they are a company applicant of a foreign reporting company.
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