/>iAs promised by the US Department of Treasury in early March, the Financial Crimes Enforcement Network (FinCEN) issued an interim final rule removing the requirement for US companies, their beneficial owners, and US persons to report beneficial ownership information (BOI) to FinCEN under the Corporate Transparency Act (CTA).
Now, only non-US entities that have registered to do business in the United States are subject to the CTA.
See our prior alert on Treasury’s March 2 announcement here.
Only Non-US Entities Subject to the CTA
The interim final rule, issued by FinCEN on March 21 and published on March 26, amends the BOI reporting rule to revise the definition of “reporting company” to extend only to entities formed under the law of a foreign country that have registered to do business in any US state or tribal jurisdiction by filing a document with a secretary of state or similar office. This category of entities under the original rule was termed “foreign reporting companies.” And, in a related move, the interim final rule also formally exempts domestic entities (formerly known as “domestic reporting companies”) from the CTA’s requirements.
No BOI Reporting of US Persons Is Required
Furthermore, reporting companies are not required to report the BOI of any US persons who are beneficial owners, and US persons are exempt from having to provide BOI with respect to any reporting company for which they are a beneficial owner.
Company Applicant Reporting Is Still Required
The concept of a “company applicant” has been retained for the foreign entities still subject to the CTA, but it applies only to the individual who directly files the document that first registers the reporting company with a state or tribal jurisdiction and to the individual (if different from the direct filer) who is primarily responsible for directing or controlling that filing. A company applicant may be a US person and is not exempted from being reported as a company applicant by virtue of being a US person.
New Initial Reporting Deadlines
Foreign entities that are “reporting companies” under the interim final rule and do not qualify for an exemption from reporting under the CTA are subject to new deadlines:
- Reporting companies registered to do business in the United States before March 26 must file BOI reports by April 25.
- Reporting companies registered to do business in the United States on or after March 26 have 30 calendar days to file an initial BOI report after receiving notice that their registration is effective (or public notice has been provided, such as through a publicly accessible registry).
Having filed an initial BOI report, a foreign entity that is a reporting company is subject to the 30-day deadline after March 26 to file an updated or corrected report as needed.
Next Steps
FinCEN is accepting comments on the interim final rule until May 27 and intends to finalize it later this year.
There are certain special cases that remain ambiguous under the interim final rule, such as that of a company that has been formed and exists simultaneously in the United States and in a foreign country. Based on the text of the interim final rule, such a company appears to not be a “reporting company,” as it presumably would fall within the new regulatory exemption for an entity that has been created by the filing of a document with a secretary of state or similar office under the law of a US state or tribal jurisdiction. But, as of now, the matter is not entirely clear.
With the changes wrought by the interim final rule, most companies are no longer subject to the CTA. For various reasons, the number of foreign entities that have registered to do business in the United States is small, and those companies may wish to consider restructuring their US activities to avoid a continued CTA obligation (although they may still need to file an initial report with FinCEN), such as by creating a US operating subsidiary.
