Implications for U.S. Businesses and Beneficial Ownership Reporting
The interim final rule issued by the Financial Crimes Enforcement Network (FinCEN) on March 21 marks the end of an on-again, off-again saga for millions of small businesses that began in late 2024.
FinCEN’s Interim Final Rule
An interim final rule issued by FinCEN eliminates beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (CTA) for all entities formed in the U.S., marking a significant regulatory shift. Additionally, U.S.-based individuals are no longer required to report BOI, even if they are beneficial owners of foreign companies conducting business in the U.S.
As expected, based on a March 2 announcement by the Treasury Department, the interim rule from FinCEN narrows the scope of BOI reporting requirements to foreign reporting companies only.
Who Still Needs to Report?
According to FinCEN, foreign companies that still have to comply with U.S. BOI reporting rules:
- Were formed under the laws of a foreign country, and
- Have registered to do business in the U.S. by filing with a secretary of state or similar office.
However, those non-exempt foreign companies are not required to report any U.S. beneficial owners.
New BOI Filing Deadlines for Foreign Companies:
- If registered before March 21, 2025, BOI reports are due by April 20, 2025.
- If registered on or after March 21, 2025, BOI reports must be filed within 30 calendar days of effective registration.
Suspension of Enforcement Actions
Prior to the issuance of the interim final rule, FinCEN had announced on February 27, 2025, that it would not enforce BOI reporting deadlines nor impose fines or penalties until the new rule became effective. This decision was part of the Treasury’s commitment to reducing regulatory burdens on businesses.
Legal Challenges and Injunctions
The implementation of BOI reporting faced multiple legal challenges. On December 26, 2024, the 5th U.S. Circuit Court of Appeals reinstated a nationwide injunction, suspending the deadline for most reporting companies to file BOI reports with FinCEN. This injunction was part of ongoing litigation questioning the constitutionality of the Corporate Transparency Act.
Supreme Court Decision and Voluntary Reporting
Despite the U.S. Supreme Court overturning an order from a Texas federal appeals court in January 2025, BOI reporting remained voluntary due to a separate nationwide injunction issued by another Texas judge. This maintained the suspension of mandatory BOI reporting requirements pending further legal resolution.
Background on the Corporate Transparency Act
The Corporate Transparency Act, signed into law in January 2021, is an anti-money laundering law that directed businesses to report their ownership structures to FinCEN. The goal was to prevent bad actors from using shell companies for illicit activities such as money laundering or drug trafficking.
A January 1, 2025, deadline had originally been set for U.S. reporting companies to file their BOI reports with FinCEN, but that deadline was delayed and suspended multiple times by federal courts. Despite the uncertainty, many businesses filed their BOI reports voluntarily.
Reactions and Next Steps
Organizations that support the Corporate Transparency Act and the BOI reporting requirements have expressed disappointment with the actions of the current Trump administration. They argue that the president’s first administration supported the Corporate Transparency Act when it was proposed in 2019.
FinCEN will accept public comments and intends to issue a final rule later this year, but significant changes to this policy are not expected.
Clarification on Beneficial Owners
The IRS provides definitions and guidelines regarding beneficial owners, which are relevant for understanding BOI reporting obligations. While FinCEN’s rule exempts U.S. businesses from reporting, it is beneficial for entities to be aware of these definitions for other compliance aspects.
Conclusion
The elimination of BOI reporting requirements for U.S. businesses is a major regulatory shift, significantly reducing compliance burdens. However, foreign entities must still adhere to reporting requirements, and businesses should stay informed as FinCEN finalizes its rulemaking process. With ongoing legal challenges and regulatory developments, companies should continue monitoring FinCEN updates and seek professional guidance if necessary.
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