The Financial Crimes Enforcement Network (“FinCEN”) has issued an interim final rule which effectively ends the obligations of U.S. companies to report their beneficial owners, and which limits the beneficial ownership reporting requirements for foreign entities, pursuant to the Beneficial Ownership Information Reporting Requirements (the “BOI Reporting Rule”) under the federal Corporate Transparency Act (“CTA”). The interim final rule, which became effective on March 26, 2025:
- Exempts companies created in the United States previously known as “domestic reporting companies” and their beneficial owners from the BOI Reporting Rule;
- Limits the entities required to report beneficial ownership information under the BOI Reporting Rule (i.e., “reporting companies”) to foreign companies;
- Eliminates foreign reporting companies’ obligations to report on beneficial owners who are U.S. persons, such that they must report only on their beneficial owners who are foreign persons; and
- Extends and adjusts reporting deadlines under the BOI Reporting Rule.
Background
Following several months of back-and-forth federal court rulings concerning the enforceability of the BOI Reporting Rule and CTA, the last nationwide order preventing enforcement of the BOI Reporting Rule was lifted on February 18, 2025. On February 19, 2025, FinCEN announced that the BOI Reporting Rule was once again in effect, but that it would extend the reporting deadline for the vast majority of companies to March 21, 2025. FinCEN noted that, during that 30-day extension period, it would “assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks.” FinCEN also stated that it “intends to initiate a process this year to revise the BOI reporting rule to reduce burden for lower-risk entities, including many U.S. small businesses.” Just over a month later, FinCEN issued its interim final rule.
The interim final rule revises the definition of “reporting company” under the BOI Reporting Rule to exclude U.S. companies. The BOI Reporting Rule originally distinguished between two different types of “reporting companies”: (1) “domestic reporting companies”, defined as corporations, limited liability companies, or other entities that are 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, and (2) “foreign reporting companies”, defined as corporations, limited liability companies, or other entities formed under the law of a foreign country and registered to do business in any State or tribal jurisdiction by the filing of a document with a secretary of state or any similar office under the law of that State or Indian tribe. The interim final order amends the definition of a reporting company to include only what was known as a “foreign reporting company”. The interim final order also amends the BOI Reporting Rule to specify that “domestic entities” (formerly known as “domestic reporting companies”) are exempt from the reporting requirements.
Further, the interim final rule provides that U.S. persons who are beneficial owners are exempt, such that foreign “reporting companies” are no longer required to report the beneficial ownership information of U.S. persons who are beneficial owners, and U.S. persons are no longer required to provide beneficial ownership information with respect to any foreign “reporting company” for which they are a beneficial owner. The interim final rule provides special rules and exemptions for “foreign pooled investment vehicles” which have only U.S. persons, or both U.S. and foreign persons, who exercise substantial control.
Foreign entities that became a reporting company on or before March 26, 2025 are required to file a report no later than April 25, 2025. Foreign entities that become a reporting company after March 26, 2025 are required to file a report within 30 days of the earlier of the date on which they receive actual notice that they have been registered to do business or the date on which a secretary of state or similar office first provides public notice that they have been registered to do business.
What May Happen Next
FinCEN is now accepting comments from the public on the interim final rule and has stated that, after taking the comments into consideration, it intends to issue a final rule this year. It is unclear if and to what extent the final rule will differ from the interim final rule.
What You Should Do Now
Domestic entities are not required to report their beneficial ownership information under the BOI Reporting Rule and the CTA. Further, if a beneficial owner of a reporting company is a U.S. person, such person is not required to report his or her beneficial ownership information under the BOI Reporting Rule and the CTA.
On the other hand, foreign entities registered to do business in the U.S. (by the filing of a document with a secretary of state or any similar office of a U.S. state or Indian tribe) should evaluate whether they qualify as a reporting company or if they meet one of the 24 exemptions under the BOI Reporting Rule (note that there were originally 23 exemptions, but the interim final rule adds domestic entities as exempted entities). If an entity does qualify as a reporting company, it should determine whether it must report “beneficial owners” and “company applicants”, identify any beneficial owners who are not U.S. persons, gather all information needed for any required reporting, and submit its initial BOI Reports. If it has previously filed a report, it should ensure any updates or corrections are timely filed. Failure to comply in a timely manner may result in substantial fines and, if the violation is willful, even imprisonment.
Under the BOI Reporting Rule, the term “U.S. person” has the meaning given such term in Section 7701(a)(30) of the Internal Revenue Code of 1986 (“IRC”). Accordingly, for purposes of the BOI Reporting Rule, the term “U.S. person” includes:
- An individual citizen or resident of the United States;
- A partnership or corporation created or organized in the United States or under the law of the U.S. or any U.S. state;
- An estate (other than a “foreign estate” as defined in Section 7701(a)(31) of the IRC); and
- A trust if either (a) a court within the United States is able to exercise primary supervision over the administration of the trust or (b) one or more U.S. persons have the authority to control all substantial decisions of the trust.
In view of this definition, foreign reporting companies must exercise care in determining whether their beneficial owners include any non-U.S. persons, bearing in mind that the term “beneficial owner” under the BOI Reporting Rule means “an individual who, directly or indirectly, either exercises substantial control over such reporting company or owns or controls at least 25 percent of the ownership interests of such reporting company” [emphasis added]. Accordingly, foreign “reporting companies” may need to look beyond their direct owners who are U.S. persons by virtue of being a U.S. partnership, corporation, estate or trust to determine if such direct owners in fact are owned or controlled directly or indirectly by foreign individuals who fall within the definition of “beneficial owner” of the reporting company.
BLM&H has previously written an extensive summary of the BOI Reporting Rule (in its original form), including on topics such as what companies are “reporting companies”, how to identify a reporting company’s “beneficial owners” and “company applicants”, and what information must be included in a BOI Report (“Corporate Transparency Act Beneficial Owner Information Reporting Requirements Take Effect on January 1, 2024 – What Business Entities Need to Know and Do” found at https://blmhlaw.com/corporate-transparency-act-beneficial-owner-information-reporting-requirements-take-effect-on-january-1-2024-what-business-entities-need-to-know-and-do/). If you are unfamiliar with the BOI Reporting Rule, we encourage you to read our summary—and to do so while keeping in mind the amendments discussed in this notice.
How BLM&H Can Help You.
BLM&H will continue to monitor developments with respect to the CTA and the BOI Reporting Rule, including whether and in what manner the final rule may be materially different from the interim final rule.
BLM&H can help you understand and comply with the BOI Reporting Rule. If you have questions about the BOI Reporting Rule, or if you need help preparing for your company’s initial, updated or corrected filings, please contact:
Kevin J. Loechl, kloechl@blmhlaw.com, 404.266.3205
Hunter Holliday, hholliday@blmhlaw.com, 404.266.3206
Quincy H. Jackson, qjackson@blmhlaw.com, 404.266.3212
Colton E. Francoeur, cfrancoeur@blmhlaw.com, 404.266.3217