After a series of legal detours, the Corporate Transparency Act (“CTA”) now finds itself on a track with fewer paths as the U.S. Department of the Treasury (the “Treasury”) took a major step to reduce the burden of reporting requirements for U.S. businesses.
On March 2, 2025, the Treasury issued a press release announcing that it will not enforce the CTA against U.S. citizens, domestic reporting companies, or their beneficial owners under both the current reporting rules and forthcoming proposed changes to the reporting rules. Additionally, the Treasury Department stated that it intends to narrow the CTA’s scope so that the reporting requirements apply only to foreign reporting companies.
While this may signal the end of CTA compliance for U.S. businesses, the Financial Crimes Enforcement Network (“FinCEN”), an agency under the Treasury umbrella, has yet to issue a clarifying notice. As of March 11, 2025, FinCEN’s newsroom still advises reporting companies to watch for an interim final rule to be issued no later than March 21, 2025 that will extend beneficial ownership information (“BOI”) reporting deadlines and provide guidance on potential rule changes. Companies must stay alert for updates a bit longer before completely disregarding the CTA’s requirements.
Key Developments:
- Narrowing the Scope of Reporting: The Treasury Department has indicated plans to limit CTA BOI reporting requirements to foreign reporting companies only, which could eliminate compliance obligations for domestic reporting companies entirely.
- Enforcement Temporarily Paused: While the CTA’s reporting obligations remain in place, no penalties or fines for noncompliance will be issued at this time.
- Upcoming Rule Changes: By March 21, 2025, FinCEN is expected to issue an interim final rule that will extend BOI reporting deadlines and provide clarity regarding CTA reporting requirements.
Under the current BOI reporting rule, entities are classified as follows:
- “Domestic reporting company” means any entity that is: (i) a corporation; (ii) a limited liability company; or (iii) created by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe.
- “Foreign reporting company” means any entity that is: (i) a corporation, limited liability company, or other entity; (ii) formed under the law of a foreign country; and (iii) registered to do business in any State or tribal jurisdiction by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe.
What This Means for Businesses:
- Domestic Reporting Companies: If you have already filed BOI reports or were preparing to do so, you may wish to pause further filings until FinCEN issues the new rule and guidance on reporting requirements moving forward.
- Foreign Reporting Companies: Entities that qualify as foreign reporting companies should continue to prepare information necessary for BOI reports and monitor guidance from FinCEN, as their obligations are likely to continue to exist.
- Ongoing Uncertainty: While the latest turn of events provides temporary relief, there is no definitive timeline for when CTA enforcement may resume or what the final rule will entail. We will continue to monitor developments closely.
