End of the Road: FinCEN Adopts Interim Final Rule Virtually Eliminating CTA Filing Requirements
On March 21, 2025, the US Financial Crimes Enforcement Network (“FinCEN”) issued an interim final rule (the “IFR”) that exempts all domestic entities from beneficial ownership information reporting requirements under the Corporate Transparency Act (the “CTA”) and its implementing regulations (the “Reporting Rule”). These changes have the effect of eliminating any reporting requirement for more than 99.9% of the entities that were previously required to report1 and, for domestic entities and US person beneficial owners, marking the end of the yearslong journey towards the CTA’s reporting requirements, which were enacted into law in early 2021 and implemented by FinCEN’s original rulemaking in September 2022.
The IFR will take effect on the date it is published in the Federal Register, which is expected to occur shortly. Until then, domestic entities and US person beneficial-owners should be able to reasonably rely on FinCEN’s intent in the March 21 announcement as the basis for not making CTA filings. For foreign reporting companies that remain subject to the CTA’s reporting requirements, the IFR extends the due date for compliance until 30 days after publication in the Federal Register.
Analysis
As revised by the IFR, the Reporting Rule now applies only to foreign entities that the previous Reporting Rule referred to as “foreign reporting companies”—i.e., entities formed under the law of a foreign country and registered to do business in a US state or tribal jurisdiction. In addition, US persons that are beneficial owners of such foreign reporting companies are now also exempted from the reporting requirements. FinCEN estimates that this revised reporting requirement will apply to approximately 20,000 entities, greatly reduced from the more than 32 million entities to which the original Reporting Rule was expected to apply.2
The IFR effects this dramatic change by revising the previous Reporting Rule in three key ways:
- First, the IFR redefines “reporting company” to apply only to entities (i) formed under the laws of a foreign country, and (ii) 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 that state or tribe. That is, the full “reporting company” definition is revised to the previous definition of “foreign reporting company,” and the previous definition of “domestic reporting company” is removed.3
- Second, the IFR adds a new exemption for any entity that is “[c]reated by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe,” which effectively moves the previous “domestic reporting company” definition to a new exemption.
- Third, the IFR exempts the remaining reporting companies from any requirement to provide beneficial ownership information with respect to US persons, and exempts US persons from any requirement to provide such information to any reporting company for which the US person is a beneficial owner.4 For these purposes, the CTA relies on the tax definition of a US person, which includes any citizen or resident of the United States.5
Notably, the revised Reporting Rule substantially narrows the statutory language of the CTA itself, which includes domestic entities expressly within the scope of the “reporting company” definition.6 This change is bolstered in the IFR by the added exemption for domestic entities, which the IFR asserts falls within the statutory provision for entities that “the Secretary of the Treasury, with the written concurrence of the Attorney General and the Secretary of Homeland Security, has, by regulation, determined should be exempt” because requiring beneficial ownership information (i) would not serve the public interest, and (ii) would not be “highly useful in national security, intelligence, and law enforcement agency efforts to detect, prevent, or prosecute money laundering, the financing of terrorism, proliferation [of] finance, serious tax fraud, or other crimes.”7 As the IFR explains, the changes result from a determination that the information the CTA and the original Reporting Rule required to be collected on domestic entities is not sufficiently useful so as to continue to be collected, among other factors.8
Although FinCEN will accept comments on the IFR, and expects to issue a final rule later this year, the issuance of the IFR effectively marks the end of the journey for domestic entities and their beneficial owners, and US beneficial owners of foreign entities registered to do business in a US state or tribal jurisdiction. Foreign entities that register to do business in US states or tribal jurisdictions (without acting through a US entity) will still need to report beneficial ownership information under the Reporting Rule (excluding beneficial ownership information about non-US owners), but only a small number of entities will likely be subject to these requirements. For all other entities, the reporting requirements are no more.
1 IFR at n.51 (“approximately 0.6 percent of the total original population, or 20,000 reporting companies”).
2 FinCEN’s math is consistent with estimates provided by secretaries of state. E.g., Fla. Div. of Corp., Yearly Statistics (Jan. 9, 2025).
3 The IFR does not address the status of entities that are formed under the laws of or registered to do business in the Republic of the Marshall Islands, Federated States of Micronesia, or Republic of Palau, each of which FinCEN has treated as “foreign” in some instances and “domestic” in others.
4 This presumably means that some CTA filings will have no beneficial owners reported. For example, if the only natural persons exercising substantial control are US persons and no natural persons own 25% or more of the entity, then there would be no one to report as a beneficial owner. There still may be company applicants to report, as there is no exemption for company applicants that are US persons.
5 31 U.S.C. § 5536(a)(14); 31 C.F.R. § 1010.380(f)(10) (incorporating 26 U.S.C. § 7701(a)(30)).
6 31 U.S.C. § 5336(a)(11)(A)(i).
7 31 U.S.C. § 5336(a)(11)(B)(xxiv).
8 This is consistent with the US Department of Justice’s recent changes in approach to federal prosecutions. See our earlier Legal Update on its new enforcement priorities.
