Treasury publishes FinCEN rule narrowing CTA BOI reporting

The Treasury Department formally published an interim final rule Wednesday limiting the scope of the Corporate Transparency Act’s beneficial ownership reporting requirement to foreign companies.

The Treasury Department’s Financial Crimes Enforcement Network issued the interim final rule, removing the requirement for U.S. businesses to report on their true ownership to FinCEN. 

The interim final rule takes effect immediately, but FinCEN is still accepting comments and intends to finalize the rule this year.

“It is important to rein in burdensome regulations to the benefit of hard-working American taxpayers and small businesses,” said Treasury Secretary Scott Bessent in a statement Wednesday. “As we continue to releverage the private sector and deleverage the government, we are reviewing all regulations to ensure they are fit-for-purpose, in furtherance of our ambitious economic growth agenda on behalf of the American people.”

The move reflects an announcement earlier this month in which FinCEN said it would no longer enforce the CTA, nor enforce any penalties or fines associated with beneficial ownership reporting under the existing regulatory deadlines. However, FinCEN left open the possibility of enforcing it against foreign companies, saying it planned to issue a proposed rulemaking that would narrow the scope of the rule to foreign reporting companies only. 

In the interim final rule, FinCEN revised the definition of “reporting company” in its implementing regulations to mean only those entities that are formed under the law of a foreign country and that have registered to do business in any U.S. state or tribal jurisdiction by the filing of a document with a secretary of state or similar office (formerly known as “foreign reporting companies”). FinCEN is also exempting entities previously known as “domestic reporting companies” from BOI reporting requirements.

Under the interim final rule, all entities created in the U.S. — including those previously known as domestic reporting companies — and their beneficial owners will be exempt from the requirement to report beneficial ownership information to FinCEN. Foreign entities that meet the new definition of a “reporting company” and don’t qualify for an exemption from the reporting requirements must report their BOI to FinCEN under new deadlines (see below). These foreign entities, however, will not be required to report any U.S. persons as beneficial owners, and U.S. persons won’t be required to report BOI with respect to any such entity for which they are a beneficial owner.

Upon the publication of the interim final rule, the following deadlines will apply for foreign entities that are reporting companies:

• Reporting companies registered to do business in the U.S. before the date of publication of the interim final rule must file BOI reports no later than 30 days from that date.
• Reporting companies registered to do business in the U.S. on or after the date of publication of the IFR have 30 calendar days to file an initial BOI report after receiving notice that their registration is effective.

The CTA was signed into law as part of the National Defense Authorization Act of 2021 and requires individuals with an ownership interest in a limited liability company to disclose personal data to FinCEN as a way to deter illicit activity such as money laundering, tax fraud, drug trafficking and terrorism financing by anonymous shell companies.

“Requiring businesses to disclose their true beneficial owners under the Corporate Transparency Act will help law enforcement by reducing criminals’ ability to hide their tracks via shell corporations,” said Eric Brown, president of the National Narcotic Officers’ Associations’ Coalition, in a statement. “Following the money is a proven strategy in investigations that involve organized criminal activity, especially fentanyl and other illicit drug trafficking. Law enforcement resources are stretched thin, and the Corporate Transparency Act — if fully implemented — would enable narcotic enforcement officers to be more effective in protecting the public from drug trafficking.”