This interim final rule significantly revises the Beneficial Ownership Information (BOI) reporting requirements for domestic entities by exempting them entirely from the reporting obligations. Previously, the Corporate Transparency Act (CTA) and its implementing Reporting Rule required many corporations, limited liability companies, and other similar entities created by filing a document with a secretary of state or similar office (defined as "domestic reporting companies") to report BOI to the Financial Crimes Enforcement Network (FinCEN).

Under this interim final rule:

Domestic reporting companies no longer have to file initial BOI reports with FinCEN.
Domestic reporting companies are also exempt from the requirement to update or correct BOI previously reported to FinCEN.

This change is implemented through several revisions to FinCEN’s regulations:

The definition of "reporting company" at 31 CFR 1010.380(c) has been revised to remove the previously defined term "domestic reporting company".
A new exemption has been added at 31 CFR 1010.380(c)(2)(xxiv) for "Domestic entity", which is defined as any corporation, limited liability company, or other entity 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 Secretary of the Treasury, with the written concurrence of the Attorney General and the Secretary of Homeland Security, determined that requiring BOI from domestic reporting companies "would not serve the public interest" and "would not be highly useful in national security, intelligence, and law enforcement agency efforts". This decision considered the regulatory burdens on primarily small businesses and was aligned with the President’s policy to reduce unnecessary regulatory burdens. While acknowledging potential illicit finance risks, the Secretary also considered alternative sources of information.

This interim final rule is effective immediately upon publication. FinCEN is accepting comments on this rule and intends to issue a final rule later this year, which may assess the appropriateness of these exemptions.

The Paperwork Reduction Act analysis in the rule indicates a significant decrease in the estimated total reporting burden hours and cost due to this exemption for domestic reporting companies. The Regulatory Flexibility Act does not apply to this rule because it was not preceded by a Notice of Proposed Rulemaking and it reduces compliance burdens.

Revised Foreign Entity Reporting Rules

The interim final rule has several key impacts on foreign reporting companies. Importantly, it does not exempt them from the overall requirement to report beneficial ownership information (BOI) to FinCEN.

Here are the specific impacts outlined in the interim final rule:

Deadline Extension: The rule extends the deadline for foreign reporting companies to file initial BOI reports, as well as to update or correct previously filed BOI reports, to 30 days from the date of the rule’s publication in the Federal Register or 30 days after their registration to do business in the United States, whichever is later. This extension is intended to provide additional time for compliance.
Exemption for U.S. Person Beneficial Owners: Foreign reporting companies are exempt from the requirement to report the BOI of any U.S. persons who are their beneficial owners. Similarly, U.S. persons are exempt from having to provide their BOI to any foreign reporting company for which they are a beneficial owner. Therefore, a foreign reporting company that only has beneficial owners who are U.S. persons will be exempt from the requirement to report any beneficial owners.
Revision for Foreign Pooled Investment Vehicles: The special rule for foreign pooled investment vehicles has been revised. These entities are now required to report BOI solely with respect to an individual who exercises substantial control over the entity if that individual is not a U.S. person. If more than one individual exercises substantial control, the entity must report information for the non-U.S. person with the greatest authority over strategic management. If there is no individual with substantial control who is not a U.S. person, the foreign pooled investment vehicle is not required to report any beneficial owners.
Continued Reporting for Non-U.S. Beneficial Owners: Foreign reporting companies are still required to report the BOI of their beneficial owners who are not U.S. persons.
Rationale for Differential Treatment: The Secretary of the Treasury determined that exempting foreign reporting companies entirely would not serve the public interest due to heightened national security and illicit finance risks associated with foreign ownership or control. This concern is supported by Congressional intent in the CTA, FinCEN’s prior findings, and recent presidential memoranda. However, the exemption for U.S. person beneficial owners of foreign reporting companies is seen as appropriately tailoring the rule considering regulatory burdens, consistent with the President’s directive to reduce unnecessary burdens on American people.

In summary, while domestic reporting companies are now entirely exempt, foreign reporting companies still have BOI reporting obligations, albeit with an extended deadline and significant exemptions related to U.S. person beneficial owners.

FinCEN’s Justification for the New Interim Final Rule

The agency, the Financial Crimes Enforcement Network (FinCEN), provides several justifications for these revised interim final rules.

Justification for Exempting Domestic Reporting Companies:

Reducing Regulatory Burden: FinCEN states that the Secretary of the Treasury, with the concurrence of the Attorney General and the Secretary of Homeland Security, determined that requiring Beneficial Ownership Information (BOI) from domestic reporting companies "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" illicit activities. This determination took into account the significant regulatory burdens that BOI reporting would impose on primarily small businesses. FinCEN recognized that these burdens were considered "excessively onerous" by many commenters during the original rulemaking process and could negatively affect small businesses financially.
Presidential Deregulation Policy: The Secretary’s decision is consistent with President Trump’s Executive Order 14192, "Unleashing Prosperity Through Deregulation," which announced a policy to significantly reduce private expenditures required for federal regulatory compliance and alleviate unnecessary burdens on the American people.
Weighing Public Interest and Usefulness: The Secretary reassessed the balance between the usefulness of collecting BOI and the regulatory burdens imposed. While acknowledging potential illicit finance risks associated with not collecting this information, the Secretary considered that the vast majority of domestic small businesses are legitimate.
Alternative Sources of Information: FinCEN also considered the existence of alternative sources of information, such as the continuing requirement for covered financial institutions to collect BOI at the time of account opening, which would help mitigate some illicit finance risks.

Justification for Changes Related to Foreign Reporting Companies:

Heightened National Security and Illicit Finance Risks: FinCEN argues that foreign reporting companies present "heightened national security and illicit finance risks" and different concerns regarding regulatory burdens compared to domestic entities. Congress itself recognized these heightened concerns by limiting certain CTA exemptions to exclusively domestic companies. FinCEN highlighted the risk of foreign illicit actors using legal entities registered in the U.S. to access the financial system for money laundering and sanctions evasion. The rule specifically mentions a National Security Presidential Memorandum (NSPM) addressing Iranian threats, which directs actions related to beneficial ownership to prevent sanctions evasion, further supporting the need for BOI reporting from foreign entities. The Financial Action Task Force (FATF) also found that shell companies, often located in foreign jurisdictions, are used in complex illicit financial structures.
Extended Deadline for Compliance: Recognizing that previous reporting deadlines had been stayed by court order, FinCEN extended the deadline for foreign reporting companies to provide "additional time to comply".
Exemption for U.S. Person Beneficial Owners (Balancing Burdens): While maintaining the reporting requirement for foreign companies, FinCEN decided to exempt them from reporting the BOI of their U.S. person beneficial owners and to exempt U.S. persons from providing this information. This exemption is justified as a measure to "ensure that the Reporting Rule is appropriately tailored to advance the public interest, considering the burdens imposed by the regulations without sufficient benefits" and is also consistent with the President’s deregulation policy aimed at reducing burdens on American people. Foreign companies are already filing a document in the U.S. to register, so the additional BOI reporting burden on U.S. persons associated with them is deemed less justified. However, the reporting of non-U.S. beneficial owners remains due to the aforementioned heightened risks.
Revised Rule for Foreign Pooled Investment Vehicles: The rule for these entities was revised to require reporting only on individuals exercising substantial control who are not U.S. persons, aligning with the broader exemption for U.S. person BOI in the context of foreign reporting companies.

Justification for Issuing an Interim Final Rule:

Good Cause Exception: FinCEN determined that there was "good cause" under the Administrative Procedure Act (APA) to issue an interim final rule without prior notice and public comment. This was deemed necessary to expeditiously exempt domestic reporting companies and U.S. persons before the then-upcoming March 21, 2025, compliance deadline. Soliciting comments beforehand would have been impractical and would have subjected these parties to potentially unnecessary compliance costs.
No New Burdens Imposed: The interim final rule does not impose new burdens but rather grants exemptions and relaxes deadlines.
Addressing Public Confusion: The agency aimed to resolve the public confusion regarding reporting deadlines that arose due to court-ordered stays.
Continued Public Participation: Despite the immediate effectiveness, FinCEN is accepting public comments for 60 days and intends to issue a final rule this year after assessing these comments.

In summary, FinCEN justifies these revisions by emphasizing the need to reduce regulatory burdens on domestic small businesses and U.S. individuals, aligning with presidential policy, while maintaining BOI reporting for foreign companies due to perceived higher risks to national security and the financial system. The interim final rule mechanism was used for its expediency in granting exemptions and clarifying deadlines, with the promise of a final rule following public comment.

Prepared with assistance from NotebookLM.

Interim Final Rule text can be read via the link below:

FinCEN 31 CFR Part 1010.380, RIN 1506-AB49