On March 21, 2025, FinCEN published an “interim final rule” (IFR) that makes sweeping changes in the reach of the Corporate Transparency Act. The IFR is immediately effective and eliminates all BOI report obligations for all domestic entities.
Highlights:
- US COMPANIES EXEMPT. Under the CTA, some companies (such as public companies, banks, large operating companies, etc.) were already exempted from the definition of a “reporting company.” The IFR now extends the exemption to all corporations, LLCs, and other entities formed under State or Tribal law.
- Any US entity that has not yet filed its initial Beneficial Ownership Information (BOI) report is now relieved of all obligations to file a BOI report.
- Any US entity that previously did file a BOI report is now relieved of all obligations to update or correct any prior BOI report.
- REGISTERED FOREIGN ENTITIES MUST STILL FILE. The BOI report obligation now remains in place only for foreign entities that register to do business in the US. As before, those entities still need to file BOI reports showing:
- Specified information about the entity itself.
- Specified information about each non-US beneficial owner – the term “beneficial owner” is limited to individuals and covers the following classes of people:
- Each “senior officer” of the reporting company
- Each other individual who, directly or indirectly, owns or controls 25% or more of the equity interests in the entity
- Each other individual who, directly or indirectly, has substantial control over the entity (meaning the ability to exercise – either alone or with others – significant influence over important decisions of the company (most directors likely qualify)
- HOWEVER, no information need be provided about any individual who is a US citizen or resident for US income tax purposes.
- Specified identifying information about each company applicant – the term “company applicant” means the one or two individuals who made or supervised the registration filing (often a lawyer or paralegal) except that a foreign entity that first registered in the US before 2024 need not list its company applicants.
- FINCEN ID NUMBER HOLDERS? The CTA allows an individual to obtain a FinCEN identifier number by filing his/her personal information directly with FinCEN. Doing so allows that individual to avoid having to give personal information (driver’s license, etc.) to the reporting company, and also shifts to the individual the obligation to keep that information current with FinCEN. The IFR made no change in the provision that imposes update obligations on those who obtain a FinCEN ID. FinCEN had earlier suggested it might develop an “off ramp” by which a person could terminate participation in the FinCEN ID program (and thus avoid a perpetual update requirement). The agency will now be under increased pressure to do so.
It is interesting to note that in its original CTA rule (issued September 30, 2022), FinCEN had estimated that some 32.6 million entities would be subject to BOI filing requirements during 2024. A close reading of the release that accompanies the new IFR suggests that FinCEN now estimates that about 30,000 foreign entities were registered in 2024 and thus subject to BOI filing requirements. If so, then this is a 99.9% reduction in covered entities – dramatic indeed. The exclusion of US persons from the definition of beneficial owner of a foreign entity is a further narrowing of the original regulatory scheme.
Several cases challenging the constitutionality of the Act are still pending, and it is foreseeable that other litigation could be filed to test whether Treasury has authority to make such sweeping changes. Other action (by rule or otherwise) could be forthcoming on what happens to the massive amount of relationship data already collected through FinCEN’s filing regime.
