U.S. Corporate Transparency Act filing requirements significantly pared back

Following several months of uncertainty and an administration change, the U.S. Financial Crimes Enforcement Network (FinCEN) has adopted new exemptions to the Corporate Transparency Act (CTA) that remove beneficial ownership reporting requirements for most companies.

What you need to know

• U.S. entities are no longer required to file, update or correct CTA beneficial ownership reports, even if they are ultimately owned or controlled by non-U.S. companies or persons.
• The interim final rule issued by FinCEN still requires entities previously defined as “foreign reporting companies” to submit beneficial ownership reports, but they will not be required to disclose their beneficial owners who are U.S. persons.
• Questions remain, including the status of pending litigation and FinCEN’s plans for beneficial ownership reports in its possession.

New exemptions to beneficial ownership reporting

Enacted in 2021, the CTA is an anti-money laundering law that established new beneficial ownership reporting requirements for millions of companies, both in the U.S. and globally. With a January 1, 2025 deadline looming for all “reporting companies” that existed on or before December 31, 2023 to file their initial beneficial ownership reports, a Texas federal court found the CTA unconstitutional and issued a nationwide injunction that put the CTA on hold. A subsequent series of appeals and parallel court proceedings with conflicting results induced whiplash over the past several months.

Now, under the new administration, FinCEN has introduced an interim final rule to take effect immediately upon formal publication that exempts most companies from any further obligations under the CTA. Specifically, all U.S. entities formed or organized in any state, territory, commonwealth or tribal jurisdiction—previously defined as “domestic reporting companies”—are exempt from the CTA’s beneficial ownership reporting requirements. Therefore, no such entities are required to file an initial beneficial ownership report or to update or correct reports that they previously submitted, even if they ultimately are owned or controlled by non-U.S. companies or individuals. FinCEN, with the concurrence of the U.S. Attorney General and Secretary of Homeland Security, has determined that requiring beneficial ownership information from these entities “would not serve the public interest” and “would not be highly useful in national security, intelligence, and law enforcement agency efforts to detect, prevent, or prosecute money laundering, the financing of terrorism, proliferation finance, serious tax fraud, or other crimes”.

Non-U.S. entities registered to do business in one or more U.S. states—previously known as “foreign reporting companies”—continue to have filing obligations under the CTA, but with significant changes. In particular, these entities, now defined simply as “reporting companies”, will no longer be required to provide any information about their beneficial owners who are U.S. persons and U.S. persons will not be obligated to supply information to entities for which they are a beneficial owner. Going forward, reporting companies registered to do business in a U.S. state before the interim final rule’s effective date will have 30 days to submit an initial beneficial ownership report or update or correct, as necessary, an earlier filing. Reporting companies that register to do business in a U.S. state after the rule’s effective date will have 30 days after their registration is effective to file an initial beneficial ownership report.

Questions remain

Several lawsuits challenging the original rules implementing the CTA are pending, and it remains to be seen how the parties to those proceedings, as well as the judges overseeing them, will respond to these noteworthy changes. Additionally, it would not be surprising to see new legal challenges to the interim final rule, particularly considering that the CTA expressly includes U.S. entities within its definition of a “reporting company”. Furthermore, although the interim final rule will take immediate effect, FinCEN is accepting public comments for 60 days, following which it could make further revisions to the final rule.

FinCEN also is yet to answer several practical questions, including what it plans to do with the several million beneficial ownership reports that newly-exempted entities previously filed or the information about U.S. persons that FinCEN received in filed reports. A separate rulemaking to align the CTA with FinCEN’s existing customer due diligence rules is also in flux.