The CTA Rollercoaster Continues: FinCEN Finalizes Major Exemption for U.S. Entities

The Corporate Transparency Act (CTA), enacted as part of the Anti-Money Laundering Act of 2020, was designed to bring greater visibility to the ownership of business entities, thereby deterring money laundering and other illicit financial activity. However, since its implementation began in 2024, the CTA’s journey has been anything but smooth. It has been a legal, regulatory, and political rollercoaster.

With the release of a new Interim Final Rule on March 21, 2025, the Financial Crimes Enforcement Network (FinCEN) has taken a dramatic turn. This rule narrows the CTA’s reach to apply only to “foreign reporting companies,” effectively exempting domestic entities and their beneficial owners from the reporting requirements.

Legal Mechanics of Rolling Back BOI Reporting for U.S. Businesses

The power to issue this new rule narrowing the scope of the Corporate Transparency Act (CTA) stems directly from statutory language within the CTA itself. Specifically, 31 U.S.C. § 5336(a)(11)(B)(xxiv) authorizes the Secretary of the U.S. Department of the Treasury, with the concurrence of the Attorney General and the Secretary of Homeland Security, to exempt certain entities from the beneficial ownership reporting requirements.
To lawfully implement an exemption, the Secretary must determine that collecting BOI from the newly exempt entities:

1. Would not serve the public interest, and

2. Would not be highly useful in national security, intelligence, or law enforcement efforts to detect, prevent, or prosecute:

• Money laundering
• Terrorist financing
• Proliferation finance
• Serious tax fraud
• Other crimes

In the Interim Final Rule issued on March 21, 2025, Treasury made both determinations with respect to U.S. domestic entities. In support of its conclusion, the agency cited the burdens imposed on small businesses, the limited added value of duplicative reporting, and the existence of other regulatory frameworks already in place.

Notably, Treasury also referenced the preexisting Customer Due Diligence (CDD) Rule, which requires financial institutions to collect beneficial ownership information at the time a legal entity opens an account. The rule concludes that the CDD framework continues to provide a meaningful check against illicit finance risks in the absence of parallel reporting by domestic entities to FinCEN, further supporting the exemption.

Additionally, the Treasury Department secured the required concurrence from both the Attorney General and the Secretary of Homeland Security, meeting the procedural prerequisites for a lawful exemption under the statute. This coordinated inter-agency determination underscores that the revised rule is not merely a policy preference but is fully grounded in the statute’s built-in flexibility—a critical detail given the CTA’s complex legal and constitutional history.

Key Takeaways from the Interim Final Rule

Domestic Entities No Longer Need to Report BOI

FinCEN has exercised its authority under the CTA to exempt all entities formerly classified as “domestic reporting companies.” These include U.S. corporations, LLCs, and other entities formed by filing with a U.S. state office. As of March 21, 2025, these entities are no longer required to:

• File initial, updated, or corrected Beneficial Ownership Information (BOI) reports;
• Collect BOI from their owners or company applicants;
• Maintain BOI for FinCEN’s reporting system.

CTA Now Applies Only to Foreign Reporting Companies

The CTA now only applies to foreign entities registered to do business in the U.S. These entities must continue to file BOI reports with FinCEN, unless their only beneficial owners are U.S. persons (as defined below)—in which case, they are now exempt as well.

For any foreign entity that meets the definition of “reporting company” that was registered to do business in the United States prior to March 21, 2025, the new reporting deadline is April 20, 2025. For a foreign entity that registers to do business in the United States after March 21, 2025, the deadline to file a BOI report is 30 calendar days after receiving notice of the effectiveness of the registration to do business in the United States.

U.S. Persons Exempted from Reporting to Foreign Companies

The rule also exempts U.S. persons from being required to provide BOI to any foreign reporting company and exempts those companies from reporting BOI of U.S. persons. The statute references the Internal Revenue Code (§ 7701(a)) when defining a U.S. person, which defines a “U.S. person” as (i) a citizen or permanent resident of the U.S., (ii) a domestic entity, (iii) an estate (other than a foreign estate), or (iv) a trust (if a U.S. court is able to exercise primary supervision or one or more U.S. persons have the authority to control substantial decisions.)