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U.S. companies can exhale. All entities created in the U.S. – including those previously known as “domestic reporting companies” and their beneficial owners – will be exempt from Corporate Transparency Act (CTA) reporting requirements.

The Financial Crimes Enforcement Network (FinCEN) issued an interim final rule that modifies the definition of “reporting company” and narrows the scope to foreign entities that have registered to conduct business within any U.S. state or tribal jurisdiction through filings with a secretary of state or equivalent office.

The interim final rule, which will be finalized later this year, is consistent with the March 2nd announcement by the U.S. Department of Treasury that alluded to only foreign entities having to report and that BOI (Beneficial Ownership Information) reporting would not be enforced on U.S. citizens and domestic reporting companies.

The latest news lifts the regulatory reporting burden on what was estimated to impact more than 30 million U.S. businesses.

Foreign entities now classified as “reporting companies” must comply with BOI reporting requirements under new deadlines. However, these foreign entities are not obligated to report U.S. beneficial owners, and U.S. individuals are not required to provide BOI for these specific foreign entities. Upon the publication of the interim final rule, the following deadlines apply for foreign entities that are reporting companies:

  • Reporting companies registered to do business in the United States before the date of publication of the IFR must file BOI reports no later than 30 days from that date.
  • Reporting companies registered to do business in the United States 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.

As mentioned earlier, FinCEN’s decision is consistent with the Treasury Department’s announcement earlier this month that there would be no BOI reporting requirements nor any penalties on U.S. businesses for not reporting. Interestingly, that announcement came after the courts gave the green light for FinCEN to enforce CTA reporting. However, the Trump administration has reversed course on the CTA, which was enacted under former President Biden.

“Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy,” said U.S. Secretary of the Treasury Scott Bessent, referring to the Treasury Department’s announcement on March 2nd.

The CTA was signed into federal law in 2021 as part of the National Defense Authorization Act that requires individuals with an ownership interest in a LLC to disclose personal data with FinCEN. The CTA was enacted by Congress as an expansion of the anti-money laundering laws, intended to prevent terrorist financing, corruption, tax fraud, and other illicit activity. FinCEN originally announced that failure to comply would result in up to two (2) years of jail time and a $10,000 fine per violation. 

The CTA went into effect on Jan. 1, 2024, but courts went back and forth on the constitutionality of the act.

Conclusion

In essence, FinCEN’s interim final rule represents a significant shift in the application of the CTA, offering substantial relief to U.S. businesses while maintaining a focus on transparency concerning foreign entities operating within the U.S.

The decision, driven by a desire to alleviate regulatory burdens on domestic companies, particularly small businesses, reflects a notable policy change under the Trump administration. While foreign entities now face specific reporting deadlines and requirements, the exemption granted to U.S. companies signals a recalibration of priorities. As this interim rule progresses towards finalization, its long-term impact on both domestic and foreign business operations in the U.S. will be closely monitored.

About Our Authors

Sean Buckley is a corporate services attorney in the Adams and Reese Houston office. Sean advises clients on a wide array of corporate matters, including the purchase and sale of equity and assets, and in a diverse array of industries, including real estate transactions, entity selection and formation, corporate governance, and franchise opportunity matters.

Brian Smithweck is a corporate services attorney in the Adams and Reese Mobile office. Brian practices in the areas of corporate, partnership and limited liability company planning, estate planning, probate, trusts and estates, M&A, tax planning and tax controversies. He represents businesses, individuals and families. He has a Master of Laws in Taxation.

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