Beneficial Ownership Reporting Requirements Narrowed

A Department of Treasury and Financial Crimes Enforcement Network (FinCEN) interim final rule has narrowed the requirements for who must file beneficial ownership information (BOI) pursuant to the Corporate Transparency Act (CTA).

A previous final rule imposed BOI reporting requirements affecting IRA-owned LLCs. Entities formed or registered to do business in the United States would need to either (i) confirm that they qualify for an exemption from the CTA’s reporting requirements, or (ii) timely submit a BOI report to FinCEN. Entities in existence before January 1, 2024, were to file an initial BOI report before January 1, 2025. 

Two U.S. District Courts held that the CTA is likely unconstitutional and granted preliminary injunctions to temporarily block enforcement of the CTA. The U.S. Supreme Court eventually stayed the lower courts’ decision that the CTA is unconstitutional, allowing the federal government to enforce the Act. Earlier this month, the Treasury Department announced that it would not enforce penalties or fines associated with the beneficial ownership information reporting rule under existing regulatory deadlines pursuant to the Corporate Transparency Act. The Treasury Department indicated it would be issuing a rulemaking that would narrow the scope of the rule.

Under the interim final rule, all domestic reporting companies and their beneficial owners are exempt from the requirements to file BOI reports or update or correct previously filed BOI reports. A domestic reporting company includes any entity that is created by the filing of a document with a secretary of state or similar office of a jurisdiction within the United States. The rule further exempts U.S. persons who are beneficial owners of foreign reporting companies from the BOI requirements. A foreign reporting company is 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.

The interim final rule is effective immediately, and comments may be submitted until May 24, 2025.