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Tax developments
CTA update: Interim final rule eliminates BOI reporting for domestic entities and US persons
FinCEN issued an interim final rule under the Corporate Transparency Act (CTA) that changes the beneficial ownership information (BOI) reporting requirements. Under this interim final rule, entities previously defined as “domestic reporting companies” are exempted from the reporting requirements and are not required to report BOI to FinCEN, or update or correct BOI previously reported to FinCEN. In addition, “United States persons,” even if they are beneficial owners of a foreign reporting company, are no longer required to report BOI to FinCEN.1 With limited exceptions, the interim final rule does not change the existing requirement for foreign reporting companies to file BOI reports, but it extends the deadline to file initial BOI reports, and to update or correct previously filed BOI reports, by no later than April 25, 2025. FinCEN is accepting comments on the interim final rule and intends on finalizing the rule within the year.
Eversheds Sutherland Observation: The CTA still expressly defines reporting companies to include domestic reporting companies, and FinCEN’s attempt to exempt domestic reporting companies from the reporting requirement may not be legal and could be challenged in court.
Eversheds Sutherland Observation: States are implementing or are considering their own versions of the CTA. For example, in New York, the New York LLC Transparency Act takes effect on January 1, 2026. In addition, California, Maryland, and Massachusetts are all considering their own versions of the CTA. Therefore, while BOI reporting at the federal level may have been curtailed for domestic entities and United States persons, such reporting may still be mandated at the state level.
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1“United States person” means (a) a citizen or resident of the United States, (2) a domestic partnership, (3) a domestic corporation, (4) any estate (other than a foreign estate), and (5) any trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust, and (b) one or more United States persons have the authority to control all substantial decisions of the trust. Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended.
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