Corporate Transparency Act: Updates as of 3/21/2025
Background of the Corporate Transparency Act (CTA)
The Corporate Transparency Act (CTA) is bipartisan legislation enacted in 2021 to help prevent and combat money laundering, terrorist financing, corruption, and tax fraud. Under the CTA, many existing and newly created companies must provide information to the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) of the underlying beneficial ownership of the reporting companies (“BOI Reporting”). Failure to timely file BOI reports could be subject to civil penalties starting at $500 per day and criminal penalties of up to $10,000 and/or two years in prison.
Current Status of the CTA
Congress has broad powers to enact laws, particularly in areas related to foreign affairs, interstate commerce and taxes. The Senate passed the CTA by a veto-proof majority of 84 to 13 (i.e., 84% passage rate). For many existing companies, the BOI Reporting deadline was set at January 1, 2025 (the “Reporting Deadline”). Subsequent events have delayed the Reporting Deadline. Here is a summary of recent developments.
- December 3, 2024 – A federal court in Texas issued a nationwide preliminary injunction prohibiting the enforcement of the CTA.
- December 11, 2024 – FinCEN requested the Fifth Circuit Court of Appeals issue a stay of the preliminary injunction with respect to the CTA.
- December 20, 2024 – Congress considered, but ultimately did not include an extension of the Reporting Deadline as part of legislation to keep the federal government funded through March 14, 2025.
- December 23, 2024 – A motions panel for the Fifth Circuit Court of Appeals issued a stay of the nationwide preliminary injunction. The Reporting Deadline of 1/1/2025 is once again in effect.
- December 24, 2024 – FinCEN extends the Reporting Deadline from 1/1/2025 to 1/13/2025.
- December 26, 2024 – A merits panel for the Fifth Circuit Court of Appeals vacates its motions panel’s previous stay of the nationwide preliminary injunction pending the outcome of the appeal.
- January 23, 2025 - The U.S. Supreme Court lifted the injunction which had paused the beneficial ownership information reporting requirements. FinCEN may again enforce the law.
- February 27, 2025 - FinCEN announced that it will not issue any fines or penalties or take any other enforcement actions against companies based on failure to file or update beneficial ownership information (BOI) reports pursuant to the Corporate Transparency Act by the current deadlines. FinCEN intends to issue an interim final rule that extends BOI reporting deadlines no later than March 21, 2025.
- March 21, 2025 - FinCEN announced a proposed change to the regulations that interpret the CTA that would exempt all U.S. companies and persons from the BOI reporting requirement. The proposed change is not final and may ultimately be prohibited as directly inconsistent with the plain language of the statute. Notwithstanding, clients may rely on the proposed regulations. Accordingly, all U.S. companies and persons no longer have a BOI reporting requirement at the present time. Foreign entities that meet the definition of a "reporting company" must report within the new deadlines.
Analysis
Absent Congressional action to repeal the CTA, it is more likely than not that the CTA will eventually be enforceable. Congress has broad powers to enact laws. The CTA is bipartisan legislation that was initially passed in the Senate by an 84% approval rate. As recently as December 20, 2024, Congress elected not to repeal the CTA or further delay the CTA’s Reporting Deadline. The information required for the BOI Reporting is information already possessed by governmental authorities for most taxpayers. However, clients may rely on FinCEN's recent proposed regulations that exempt U.S. companies and persons from the BOI reporting requirement until such time as the proposed regulations are withdrawn, either voluntarily or upon Court order.
Recommendation
On March 21, 2025, FinCEN issued an interim final rule that significantly changes the scope of Beneficial Ownership Information (BOI) reporting under the Corporate Transparency Act. Effective immediately, U.S. companies and U.S. persons are no longer required to report BOI to FinCEN.
Under the revised rule, only entities formed under the laws of a foreign country and registered to do business in the United States (now defined as “reporting companies”) are subject to BOI reporting requirements. U.S. entities previously classified as “domestic reporting companies” are now exempt from these obligations, as are their beneficial owners.
For foreign entities that qualify as reporting companies and are not otherwise exempt, the following deadlines now apply:
- Foreign reporting companies registered before March 21, 2025 must file BOI reports within 30 days of that date.
- Foreign reporting companies registered on or after March 21, 2025 must file their initial BOI reports within 30 days of receiving notice of their registration becoming effective.
No BOI reporting is required from U.S. companies or U.S. persons at this time.
We recommend that clients with international affiliations or foreign business registrations contact our Firm to determine whether they are still subject to these reporting requirements. We will continue monitoring FinCEN’s guidance and provide updates as the rule moves toward finalization.
