Corporate Transparency Act Narrowed: What This Means for You

The Corporate Transparency Act (CTA), enacted in 2021, was designed to combat money laundering and other illicit financial activities by requiring increased transparency in business ownership. It obligated many small and closely held entities to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).

Under the original rule, most small to mid-sized businesses were required to file a Beneficial Ownership Information (BOI) report identifying individuals who either:

1. Exercised substantial control over the entity, or
2. Owned or controlled at least 25% of the entity’s ownership interests.

However, a recent rule issued by FinCEN significantly alters these requirements.

Court Challenge Leads to Significant Rollback

In National Small Business United v. Yellen, a federal court ruled that the Corporate Transparency Act exceeded Congress’s constitutional authority. Although the ruling applied only to the plaintiffs in that case, it prompted serious questions about the law’s enforceability.

In response, FinCEN has issued an interim final rule that significantly narrows the scope of the CTA.

What’s Changed?

Domestic Companies Are Now Exempt

Under the new rule, U.S.-formed entities—including corporations, LLCs, and other entities created by filing with a Secretary of State—are no longer required to file initial BOI reports, update those reports when ownership or control changes, or correct previously filed reports.This means that if your business was formed in the United States, you likely have no remaining BOI reporting obligation.

U.S. Individuals No Longer Report for Foreign Entities

U.S. Citizens and residents who are beneficial owners of foreign entities are also exempt from BOI reporting. Foreign companies are no longer required to report U.S. individuals as beneficial owners.

Foreign Entities Must Still Report—But with Limitations

The CTA now applies only to foreign entities that are registered to do business in the United States. However, if all beneficial owners of a foreign reporting company are U.S. persons, the entity is not required to report at all.

New Reporting Deadlines for Foreign Entities

Foreign entities registered before the interim rule’s publication must file their beneficial ownership information report by April 25, 2025. Foreign entities registered after publication of the interim final rule must file within 30 days of receiving effective registration notice.

Regulatory Impact

The rollback is significant. FinCEN had estimated 32 million existing entities would be required to report under the Corporate Transparency Act, with 5 million more becoming subject annually. Under the new rule, less than 12,000 foreign companies are expected to fall within the revised reporting scope. 

What Should You Do Now?

If your business is a domestic entity formed in the U.S., you are likely no longer subject to CTA reporting. This includes any obligations to file, update, or correct a BOI report.

However, if you own or operate a foreign entity registered in the U.S., reporting may still be required if the beneficial owners are non-U.S. persons.