FinCEN Significantly Narrows Corporate Transparency Act Reporting Requirements

On March 21, the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) published an interim final rule (the “March 21 Rule”) that:

• Narrows (significantly) the beneficial ownership information (“BOI”) reporting requirements of the Corporate Transparency Act (“CTA”); and
• Extends the CTA’s BOI reporting deadline for 30 days.

FinCEN will accept comments on the March 21 Rule for 60 days and intends to issue a final rule this year.

Background

The CTA’s Beneficial Ownership Information Reporting Requirements (“BOI Rule”) requires “reporting companies” to report information regarding their beneficial owners to a national corporate registry.  The BOI Rule originally defined two types of reporting companies:

• Domestic reporting companies, which refers to legal entities created by the filing of a document with a secretary of state or any similar office of a U.S. State.
• Foreign reporting companies, which refers to legal entities formed under the law of a foreign country that have registered to do business in any U.S. State by the filing of a document with a secretary of state or any similar office of a U.S. State.

As originally drafted, the BOI Rule set forth 23 exemptions to the definition of reporting company, including exemptions for registered investment advisers, certain exempt reporting advisers, qualifying pooled investment vehicles operated or advised by an exempt adviser, large operating companies, and subsidiaries of most—but not all—other categories of exempt entities.

Since its enactment, the BOI Rule has been the subject of extensive legal challenges and, beginning in December 2024, the subject of conflicting federal court decisions enjoining—and then reinstating—the Rule’s enforcement.  In response to these decisions, the Treasury Department published a series of updates:

• On February 19, FinCEN announced that enforcement of the BOI Rule would resume under a new, extended reporting deadline of March 21, 2025 for most reporting companies.
• On February 27, FinCEN announced that it (1) would not issue any penalties or take any other enforcement actions against any companies that failed to report by March 21 and (2) intended to issue an interim final rule further extending the BOI Rule’s reporting deadline.
• On March 2, the Treasury Department announced that it planned to issue a proposed rulemaking that would narrow the scope of the BOI Rule to foreign reporting companies only.

March 21 Rule

The March 21 Rule:

• Exempts domestic reporting companies, and their beneficial owners, from the requirement to file initial BOI reports, or to update or correct previously filed BOI reports.
• Exempts foreign reporting companies, and their U.S. person beneficial owners, from the requirement to provide the BOI of any U.S. persons who are beneficial owners of the foreign reporting company.
• Retains the requirement for foreign reporting companies, and their beneficial owners (excluding U.S. persons), to report their BOI to FinCEN, while extending the deadline for those companies to file initial BOI reports, or update or correct previously filed BOI reports, until 30 days after the publication of the March 21 Rule in the Federal Register or 30 days after their registration to do business in the United States, whichever comes later.

Next Steps

Subject to further developments, the March 21 Rule eliminates BOI reporting requirements for most entities that previously qualified as in-scope reporting companies.  In addition, the March 21 Rule narrows the scope of information that will need to be reported for (the relatively limited universe of) foreign reporting companies.

As the BOI Rule remains the subject of multiple legal challenges, domestic and foreign reporting companies (as originally defined) should continue to monitor for further developments.