On March 21, 2025, the Financial Crimes Enforcement Network (FinCEN) published an interim rule reorienting FinCEN’s implementation of the Corporate Transparency Act (CTA). The interim rule requires that only foreign entities registered to do business in a U.S. State or Tribal jurisdiction must report certain beneficial owners. At this time, domestic reporting companies are no longer required to report beneficial owner information (BOI). Further, foreign entities do not have to report the information of U.S. persons who are beneficial owners of that entity. Domestic reporting companies and U.S. persons exempt from the reporting requirements are not required to update information they have already provided to FinCEN. It is estimated that only 11,667 entities will need to comply with the CTA under the interim rule.
A foreign reporting company is defined as an entity “formed under the law of a foreign country and that is registered to do business in the United States by the filing of a document with a secretary of state or equivalent office under the law of a state or Indian tribe.” Only foreign entities meeting this definition must report BOI. The deadline for qualifying foreign reporting companies to report BOI is April 25, 2025, or 30 days after registration to do business in the U.S. The result of this narrowed definition of a reporting company is that domestic reporting companies and U.S. persons who are beneficial owners of foreign reporting companies are exempt from reporting BOI. Also exempt from reporting requirements are foreign pooled investment vehicles, which do not have to report the BOI of U.S. persons who exercise substantial control over the entity.
The changes are intended to lessen regulatory burdens on American businesses and individuals, while maintaining reporting requirements for foreign entities which pose national security risks. However, foreign companies appear to be able to simply create U.S.-organized subsidiaries to do business and take advantage of the exemption for domestic reporting companies to circumvent the rule. The interim rule undercuts the intent of the CTA, which Congress wrote to apply to both domestic and foreign reporting companies to combat money laundering, terrorism financing, tax fraud, financial fraud and other corruption “harming the national security interests of the United States.” The rule is open to public comment until May 27, 2025.
Once the final rule is published, we expect it to be challenged and for the CTA saga to continue with the CTA’s original definitions of “reporting companies” potentially being reinstated. Further complications arise with the ongoing challenges to the constitutionality of the CTA. Although the Fifth Circuit has postponed oral argument and asked for supplemental briefing from the parties on the impact of the interim rule on the case, FinCEN’s reoriented interpretation of the CTA does not automatically make the underlying constitutional challenges moot.
So, despite FinCEN’s interim rule exempting domestic reporting companies from reporting BOI, the CTA’s requirements remain in flux. The final rule could contain a different interpretation of the CTA than the interim rule; the final rule could be challenged in court as a violation of the APA; the CTA could be struck down as unconstitutional; or Congress could act by repealing or amending the CTA. Given the current administration’s posture towards the CTA, it is unlikely that there will be any near-term finality on CTA reporting absent a Congressional repeal or clarification on the scope of the CTA.
The interim rule also leaves several open questions regarding domestic reporting companies, including whether companies can voluntarily comply with the reporting architecture of the prior rule and what will happen to filed BOI reports. As a result, the 32 million businesses that have been buffeted by changes to the CTA’s requirements and want to move on will unfortunately have to wait for additional clarity.
Meanwhile, states are enacting their own ownership reporting requirements, resulting in companies having to comply with varied requirements from each state in which they operate. New York has already enacted such a law.
Should you have any questions regarding these changes, including the current status of your local state laws, please reach out to Parsons’ CTA team by calling (406) 317-7220 or by sending an email to cta@parsonsbehle.com.
