Interim Final Rule Exempts Domestic Companies from Beneficial Ownership Reporting

(Parker Tax Publishing April 2025)

The Financial Crimes Enforcement Network (FinCEN) adopted an interim final rule to narrow the existing beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act to require only entities previously defined as "foreign reporting companies" to report BOI. Under this interim final rule, entities previously defined as "domestic reporting companies" are exempted from the reporting requirements and do not have to report BOI to FinCEN, or update or correct BOI previously reported to FinCEN. RIN 1506-AB49.

Background

On January 1, 2021, Congress enacted into law the Corporate Transparency Act (CTA) as part of the broader Anti-Money Laundering Act of 2020 (Pub. L. 116-283). Section 6403 of the CTA, among other things, amended the Bank Secrecy Act (BSA) by adding a new Section 5336, Beneficial Ownership Information Reporting Requirements, to Title 31 of United States Code. This section established new beneficial ownership information (BOI) reporting requirements for many corporations, limited liability companies, and other similar entities operating in the United States.

On September 30, 2022, the Financial Crimes Enforcement Network (FinCEN) published the Beneficial Ownership Information Reporting Requirements final rule (Reporting Rule), implementing the CTA's reporting requirements (31 U.S.C. 5336(b)). The Reporting Rule became effective on January 1, 2024, and is codified in FinCEN's regulations at 31 CFR 1010.380. Section 1010.380 requires certain corporations, limited liability companies, and other similar entities (reporting companies) to report certain identifying information about the reporting companies themselves, the beneficial owners who own or control them, and, for companies created on or after January 1, 2024, the company applicants who form or register them.

Section 1010.380 previously required domestic reporting companies and foreign reporting companies created or registered to do business in the United States before the rule's effective date of January 1, 2024, to file initial BOI reports with FinCEN by January 1, 2025, one year after the effective date of the regulations. Domestic reporting companies created in 2024 and those foreign reporting companies registered to do business in the United States in 2024 had 90 days to file their initial BOI reports with FinCEN. Starting on January 1, 2025, Section 1010.380 provided all reporting companies created or registered on or after that date with 30 days to file their initial reports.

The January 1, 2025, deadline previously established in FinCEN's regulations was postponed in light of litigation challenging the CTA. In two cases (Texas Top Cop Shop, Inc., et al. v. Garland, 2024 PTC 426 (E.D. Tex. 2024); and Smith v. U.S. Dept. of the Treasury, 2025 PTC 56 (E.D. Tex. 2025)), district courts issued universal orders that preliminarily enjoined FinCEN from implementing and enforcing the CTA and the Reporting Rule or stayed the effective date of Section 1010.380 on a nationwide basis.

On March 2, 2025, the Treasury Department announced the suspension of enforcement of the CTA against U.S. citizens, domestic reporting companies, and their beneficial owners, and the Treasury Department further announced its intent to engage in a rulemaking to narrow the Reporting Rule to foreign reporting companies only.

Interim Final Rule

On March 26, FinCEN published an interim final rule (RIN 1506-AB49) that exempts domestic reporting companies from the Reporting Rule. The interim final rule also exempts foreign reporting companies from having to report the BOI of any U.S. persons who are beneficial owners of the foreign reporting company, and exempts U.S. persons from having to provide such information to the foreign reporting companies for which they are a beneficial owner.

Specifically, the interim final rule exempts all domestic reporting companies, and their beneficial owners, from the requirement to file initial BOI reports, or to update or correct previously filed BOI reports, by excluding domestic companies from the scope of the term "reporting company." The rule text provides for this change by redefining the term "reporting company" at 31 CFR 1010.380(c) to remove the previously defined term "domestic reporting company" at 31 CFR 1010.380(c)(1)(i). By taking this step, any entity that meets the definition of the previously defined term "domestic reporting company" is no longer within the scope of the Reporting Rule. Moreover, FinCEN is adding an exemption to the list of exempted entities at 31 CFR 1010.380(c)(2). This exemption is applies to "any entity that is: (A) a corporation, limited liability company, or other entity; and (B) created by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe."

The interim final rule also exempts foreign reporting companies, and their U.S. person beneficial owners, from the requirement to provide the BOI of any U.S. persons who are beneficial owners of the foreign reporting company. The rule text provides for this change by adding an exemption at 31 CFR 1010.380(d)(4)(i): "Reporting companies are exempt from the requirement in 31 U.S.C. 5336 and this section to report the beneficial ownership information of any U.S. persons who are beneficial owners." It also adds an exemption at 31 CFR 1010.380(d)(4)(ii): "U.S. persons are exempt from the requirements in 31 U.S.C. 5336 and this section to provide beneficial ownership information with respect to any reporting company for which they are a beneficial owner." Foreign reporting companies that only have beneficial owners that are U.S. persons will be exempt from the requirement to report any beneficial owners.

With limited exceptions, the interim final rule does not change the existing requirement for foreign reporting companies to file BOI reports, but it extends the deadline to file initial BOI reports, and to update or correct previously filed BOI reports, to April 25, 2025 (i.e., 30 days from the date the interim final rule was published) to give foreign reporting companies additional time to comply.

The interim final rule is effective March 26, 2025. FinCEN states that it is accepting comments on the interim final rule and intends to issue a final rule this year.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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