Key Development: FinCEN Limits CTA Reporting to Foreign Entities — For Now

On March 21, 2025, the Financial Crimes Enforcement Network (FinCEN) issued an interim final rule (IFR) that significantly narrows the reporting requirements under the Corporate Transparency Act (CTA). Under the IFR, only foreign entities registered to do business in the United States are required to report beneficial ownership information (BOI) to FinCEN.

FinCEN accomplished this by revising the current regulation and removing the term “domestic reporting company” from the definition of entities required to report and instead placing domestic entities within the list of exemptions. The result is that U.S.-formed companies (e.g., corporations, LLCs) are now, according to FinCEN, excluded from the CTA’s reporting obligations.

Statutory Conflict: Why Uncertainty Remains

Although FinCEN has issued this regulatory change, the underlying statute—the Corporate Transparency Act—was not amended and still explicitly requires reports from domestic reporting companies. FinCEN’s rule contradicts the statute and creates uncertainty; there is a likelihood of legal challenges to this reinterpretation—particularly in an environment where courts are no longer required to defer to agency interpretations that contradict clear statutory text. In other words, the IFR does not override the law enacted by Congress. Accordingly, its effort to exempt domestic entities may be struck down by the courts.

Our Recommendation: File If Prepared, Monitor If Not

Given this uncertainty, we believe it is prudent for businesses to consider the risks of noncompliance with the CTA, particularly if they have already incurred costs collecting beneficial ownership information.

  • If you have already gathered BOI and are ready to file, we recommend moving forward with filing. It may help avoid future penalties if the IFR is overturned or revised.
  • In addition, you may elect to wait and monitor legal developments—but do so understanding the current conflict between the CTA and the IFR

Current Reporting Landscape: Foreign Entities Must Still Comply

FinCEN’s interim final rule redefines “reporting company” to include only foreign entities formed under the laws of a foreign country and registered to do business in a U.S. state or tribal jurisdiction.

These entities must still comply with the CTA and meet updated filing deadlines:

  • Foreign entities registered before publication of the rule must file their BOI reports within 30 days of publication.
  • Foreign entities registered after publication must file their BOI reports within 30 days of effective registration.
  • FinCEN has confirmed that U.S. persons do not need to report BOI, even if they are beneficial owners of a foreign reporting company.

What Should You Do Now?

  • Domestic companies: While FinCEN’s rule says no reporting is required, the statute suggests otherwise. If you are prepared, filing may reduce risk. If not, continue to monitor the legal landscape closely.
  • Foreign companies: You must comply with the revised BOI reporting rules and deadlines unless you qualify for a specific exemption.
  • Everyone: Be aware that this interim rule may change again following public comment or future litigation.

Key Takeaways

  • FinCEN’s interim rule excludes domestic companies from CTA BOI reporting, but the statute still says otherwise.
  • Legal challenges are expected, and a future ruling could reinstate domestic reporting requirements.
  • We recommend filing for domestic entities that are ready, especially those that have already invested in compliance efforts.

Need Assistance? Contact our team for tailored guidance on your CTA reporting obligations or to assess your risk exposure in light of recent developments.

Please note that the firm will not monitor compliance, file beneficial ownership reports, or report changes to beneficial ownership unless expressly agreed to in writing.

We encourage those who may be subject to the CTA to engage a corporate compliance services provider experienced in FinCEN reporting. Please contact your Winthrop attorney or other legal counsel for referrals.

March 31, 2025