Further Update to the CTA: Domestic Entities Exempt Under Interim Final Rule

There has been a new development for the Corporate Transparency Act (CTA) following the various lawsuits and injunctions that delayed the CTA’s final implementation. On Friday March 21, 2025 the Treasury Department’s Financial Crimes Enforcement Network (FINCEN) issued an “interim final rule” which exempts all domestic reporting companies, and their beneficial owners from the requirement to file BOI reports – including initial, updated or corrective reports. Initial reactions to this interim rule seem to be pretty universal. The consensus is that it renders the intended database of company ownership information almost useless.

First, this interim final rule exempts all domestic reporting companies, and their beneficial owners, from the requirement to file under the CTA by essentially excluding domestic companies from the scope of the term “reporting company” under the CTA. As explained by FINCEN: “By taking this step, any entity that meets the definition of the previously defined term “domestic reporting company” is no longer within the scope of the Reporting Rule.”

But the requirements to register and file BOI reports still applies to a foreign reporting company which is defined as “a corporation, limited liability company, or other entity that is formed under the law of a foreign country and that is registered to do business in the United States by the filing of a document with a secretary of state or equivalent office under the law of a state or Indian tribe.” Foreign reporting companies are thus still subject to the CTA, although this interim final rule exempts foreign reporting companies, and their US person beneficial owners, from the requirement to provide the BOI of any US persons who are beneficial owners of the foreign reporting company.

This change in the CTA Regulations are a result from the Trump administration’s Executive Order (E.O. 14192) Unleashing Prosperity Through Deregulation”, which announced a policy “to significantly reduce the private expenditures required to comply with Federal regulations” and “to alleviate unnecessary regulatory burdens placed on the American people.” With regards to the CTA, the Attorney General and the Secretary of Homeland Security, determined that requiring beneficial ownership information from domestic reporting entities “would not be highly useful in national security, intelligence, and law enforcement agency efforts to detect, prevent, or prosecute money laundering, the financing of terrorism, proliferation finance, serious tax fraud, or other crimes.”

These interim rules obviously narrow the companies responsible for reporting ownership information under the CTA, and as a result, just under 12,000 companies will have to comply each year, compared to the roughly 32 million first estimated to be impacted.

Commentators have also been quick to point out that a foreign reporting entity can form a wholly owned US subsidiary to conduct its US domestic business (as opposed to an entity formed under the law of a foreign country and registered to do business in the United States), which will exempt them from reporting.

The CTA, therefore, remains a law on the US books and a beneficial ownership register continues to exist in the United States, but this interim final rule has certainly taken the bite out of the register.

If you have any questions, please contact us.