Morris, Nichols, Arsht & Tunnell LLP
MONTH-IN-BRIEF (Apr 2025)
Prudence Is the New Corporate Transparency Act Watchword
By William E. H. Quick, Polsinelli PC
As noted in our prior installment on the Corporate Transparency Act (“CTA”) saga, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) has adopted an Interim Final Rule (“IFR”), which narrowed the beneficial ownership information (“BOI”) reporting requirements under the CTA to require only “foreign reporting companies” to report BOI, and even then only BOI for non-U.S.-person beneficial owners. This IFR is subject to a comment period through May 27, 2025, after which a final rule is anticipated to be issued by Treasury before year end.
The CTA itself exempts from the definition of “reporting company” twenty-three specific types of entities. Many of these exempt entities are already subject to substantial federal and/or state regulation or are already required to provide their beneficial ownership information to a governmental authority. The CTA also authorizes the Treasury Secretary “to exempt, by regulation, additional types of entities for which collecting BOI would neither serve the public interest nor be highly useful in national security, intelligence, and law enforcement agency efforts.” See 87 Fed. Reg. 59,498 at 59,539 (Sept. 30, 2022). Prior to the IFR, Treasury had determined not to exempt any entities beyond the original twenty-three named in the CTA. With the IFR, upon reliance on the above authority, Treasury issued a blanket removal of all “domestic reporting companies” and all U.S. persons from the scope of the CTA and its BOI reporting. Virtually all of these newly exempted entities were not subject to existing meaningful federal and/or state regulation, nor were they otherwise providing BOI to a governmental authority. Further, the IFR does not, on its face, appear to “serve the public interest,” and the IFR does not single out only information reporting that is not “highly useful in national security, intelligence, and law enforcement agency efforts.”
