By: Stacey Barrack
The Corporate Transparency Act (“CTA”), enacted as part of the Fiscal Year 2021 National Defense Authorization Act and a key component of the Anti-Money Laundering Act of 2020, represents a significant shift in corporate governance and anti-money laundering regulations.[1] Designed to curb illicit finance, the CTA initially required most companies operating in the United States to report information about their beneficial owners to the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”).[2] However, recent developments have significantly altered the landscape of these reporting requirements.[3]
On March 21, 2025, FinCEN issued an Interim Final Rule that exempts U.S. companies and U.S. persons from beneficial ownership information (“BOI”) reporting obligations.[4] This rule redefines “reporting company” to include only entities formed under the law of a foreign country and registered to do business in the United States.[5] Consequently, entities previously known as “domestic reporting companies” can now disregard BOI reporting requirements.[6]
A beneficial owner is defined as an individual who, directly or indirectly, exercises substantial control over a company or owns or controls at least twenty-five percent of the ownership interests of a company.[7] Originally, the CTA required in-scope companies to report the names, dates of birth, addresses, and other government-issued identification information to FinCEN in order to increase transparency and eliminate corporate anonymity within the financial system.[8] It intended to address a critical vulnerability within the sector notorious for enabling money laundering, drug trafficking, terrorism, and corruption.[9] By eliminating corporate anonymity, CTA created a more level playing field for law-abiding businesses and enhanced investor trust.
However, after a flurry of legal pitfalls, compliance challenges, and disjointed Treasury statements, FinCEN released its Interim Final Rule, making three significant changes.[10] First, the Interim Rule redefines a reporting company in FinCEN’s CTA regulations and exempts all previously classified domestic reporting companies, including corporations, limited liability companies, limited partnerships, and other entities formed under U.S. state or tribal laws.[11] Thus, these entities are no longer required to file, update, or correct BOI reports, irrespective of whether their beneficial owners are U.S. persons.[12]
Second, the Interim Rule narrows the scope of “reporting company” to include only foreign legal entities registered to do business in the United States.[13] However, these entities only need to report BOI for their non-U.S. person beneficial owners.[14] If a reporting company only has U.S. person beneficial owners, then it is also now exempt from reporting BOI and only required to report information about the entity itself and its company applicants.[15]
Finally, the Interim Rule revises the reporting deadlines for in-scope companies.[16] Now, reporting companies that registered to do business in the United States prior to March 21, 2025, must file BOI reports no later than April 20, 2025, while reporting companies that register on or after March 21, 2025, have 30 calendar days to file an initial BOI report after receiving notice that their registration is effective.[17] Taken together, the changes represent a significant shift in the regulatory landscape, altering the status quo established by the CTA.
By exempting U.S. companies and U.S. persons from BOI reporting requirements, FinCEN has reduced the administrative burden on domestic businesses, particularly small businesses that may lack the resources to navigate complex regulatory reporting frameworks.[18] The reduction in compliance costs and administrative tasks can lead to increased operational efficiency and a more favorable business environment.[19]
However, this exemption also raises concerns about the transparency and accountability of corporate operations.[20] Critics argue that exempting domestic entities undermines the CTA’s original intent to combat illicit finance by eliminating corporate anonymity.[21] Without comprehensive BOI reporting, tracking and preventing illegal activities, such as money laundering and terrorism financing, becomes exponentially more difficult while eroding investor trust and public confidence in the transparency of corporate operations.[22]
These changes have both positive and negative implications for businesses. On one hand, exempting U.S. companies from BOI reporting reduces administrative burdens and compliance costs, particularly for small businesses, leading to increased operational efficiency and a more favorable business environment.[23] On the other, the exemption raises concerns among investors and stakeholders about the transparency and accountability of corporate operations. [24]
The Interim Final Rule necessitates a reevaluation of governance structures to ensure compliance with the new regulatory framework. Companies must balance the benefits of reduced compliance burdens with the need to maintain investor trust and uphold ethical standards. Corporate boards must stay informed about regulatory changes and proactively oversee and address compliance challenges. By doing so, companies can enhance their governance practices, build investor trust, and contribute to a more transparent and accountable business environment.
[1] William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, Pub. L. No. 116-283, §§ 6401-03, 134 Stat. 3388, 4604-25 (2021) [hereinafter FY21 NDAA].
[2] Id. at 4604-05.
[3] Press Release, Fin. Crimes Enf’t Network, FinCEN Removes Beneficial Ownership Reporting Requirements for U.S. Companies and U.S. Persons, Sets New Deadlines for Foreign Companies (Mar. 21, 2025), https://www.fincen.gov/news/news-releases/fincen-removes-beneficial-ownership-reporting-requirements-us-companies-and-us.
[4] Id.
[5] Beneficial Ownership Information Reporting Requirement Revision and Deadline Extension, 90 Fed. Reg. 13688, 13690-92 (Mar. 26, 2025) (to be codified at 31 C.F.R. pt. 1010) [hereinafter Interim Final Rule].
[6] Id. at 13690.
[7] 31 C.F.R. § 1010.230 (2025).
[8] See FY21 NDAA, supra note 1, at 4612.
[9] See generally The President’s Fiscal Year 2019 Budget: Hearing on the President’s Fiscal Year 2019 Budget Before the S. Comm. on Fin., 115th Cong. (2018) (describing the legislative intent behind the CTA as combatting money laundering, financing of terrorism, proliferation finance, tax evasion, human and drug trafficking, sanctions evasion, and other financial crimes).
[10] See, e.g., Texas Top Cop Shop, Inc. v. Garland, No. 4:24-CV-478, 2024 WL 5049220, at *7 (E.D. Tex. Dec. 5, 2024) (granting a nationwide preliminary injunction to enjoin enforcement of the CTA and holding that the CTA is likely unconstitutional because it may exceed Congress’s powers under the Commerce Clause and not justified under the Necessary and Proper Clause, thereby violating the Tenth Amendment).
[11] Interim Final Rule, 90 Fed. Reg. at 13690-91.
[12] Id.
[13] Id. at 13692.
[14] Id.
[15] Id.
[16] Id. at 13693.
[17] Id.
[18] See generally id. (narrowing the reporting requirements under the CTA to reduce the regulatory burden on U.S. companies).
[19] Id.
[20] See, e.g., Maureen Leddy, Reading the Tea Leaves: Corporate Transparency Act Update, Reuters, Mar. 14, 2025, https://tax.thomsonreuters.com/news/reading-the-tea-leaves-corporate-transparency-act-update/.
[21] See Press Release, Senator Sheldon Whitehouse, Whitehouse, Grassley Demand Explanation of Treasury Department’s Decision to Suspend Enforcement of Corporate Transparency Act (Mar. 10, 2025) [hereinafter Whitehouse, Grassley Press Release], https://www.whitehouse.senate.gov/news/release/whitehouse-grassley-demand-explanation-of-treasury-departments-decision-to-suspend-enforcement-of-corporate-transparency-act/.
[22] See Beneficial Ownership Information Reporting Rule Fact Sheet, Fin. Crimes Enf’t Network, https://www.fincen.gov/beneficial-ownership-information-reporting-rule-fact-sheet (last visited Apr. 14, 2025) (“Beyond the direct benefits to law enforcement and other authorized users, the collection of BOI will help to shed light on criminals who evade taxes, hide their illicit wealth, and defraud employees and customers and hurt honest U.S. businesses through their misuse of shell companies.”).
[23] See Interim Final Rule, 90 Fed. Reg. at 13695.
[24] See Whitehouse, Grassley Press Release, supra note 19.
