The U.S. Treasury Department issued an Interim Final Rule under the Corporate Transparency Act (“CTA”) to limit the obligation to file beneficial ownership information (“BOI”) reports to foreign companies. The CTA previously required foreign and domestic companies to file BOI reports.
Background:
The CTA, which was passed in 2021, required all Reporting Companies—including certain trusts—to file BOI reports beginning in 2024. Reporting Companies formed prior to January 1, 2024 had until January 1, 2025 to comply with the reporting requirement. BOI reports require disclosure of personal information about the entity’s “beneficial owner(s).”
Over the past few years, the CTA was the subject of a multitude of legal challenges. On March 1, 2024, the U.S. District Court for the Northern District of Alabama held Congress exceeded its constitutional authority by enacting the CTA. Later in 2024, a U.S. District Court for the Eastern District of Texas entered an order granting a preliminary injunction blocking enforcement of the CTA nationwide. The federal government then appealed and was granted a stay against the preliminary injunction in the U.S. Court of Appeals for the Fifth Circuit. However, several days later a full panel of the U.S. Court of Appeals for the Fifth Circuit vacated the order granting the stay. The reporting requirements were then reinstated early in 2025.
Recent Updates:
On February 19, 2025, the Financial Crimes and Enforcement Network (“FinCEN”)—the agency responsible for overseeing BOI reporting—announced it would suspend reporting obligations under the CTA and provide further guidance on March 21, 2025. March 2, 2025, the U.S. Treasury Department announced it would not enforce penalties against domestic entities for failure to comply with the BOI reporting requirements. On March 21, 2025, FinCEN Issued Interim Final Rules exempting all domestic entities from the CTA’s BOI reporting requirements. Domestic entities under the CTA are companies or other entities created by the filing of a document with a secretary of state or similar office in the United States. Foreign entities, on the other hand, are entities formed outside of the United States that conduct business within the United States. The reporting requirements still apply to foreign entities, which have until April 25, 2025 to file BOI reports.
If you have questions about what this means for your business, contact one of Montgomery Purdue’s business and corporate attorneys.