The Latest Chapter of the Corporate Transparency Act Saga

Treasury Department Issues New Rule for U.S. Companies

In his column earlier this year, Matt Dorsey wrote two articles about the Corporate Transparency Act (CTA). Matt explained that the CTA had wide ranging application to U.S. businesses, and that failure to comply with its provisions could result in serious criminal and civil liabilities.

I have been following the developments regarding the CTA, and here is a Q&A that gives some background and an update on where we are now.

Why did Congress enact the CTA?

Congress found that each year about two million corporate entities, i.e., corporations and limited liability companies, are formed throughout the U.S, but there are no requirements to provide information about the entities’ owners. As a result, some people concealed their identities to engage in illegal activity under the corporate name, including financial and national security crimes, such as terrorism, money laundering, fraud and tax evasion.

In an effort to assist investigations by law enforcement, Congress enacted the CTA, which requires a “Reporting Company” to file “Beneficial Ownership Information Reports” (“BOI Reports”).

What is a Reporting Company?

A Reporting Company is a corporation, limited liability company, or other similar corporate entity that is created by the filing of a document with the Secretary of State or similar office under the law of any State. This is important, because it applies to many Saratoga Today readers. If a brother and a sister created an LLC to own an investment property for an Airbnb rental, that LLC would qualify as a Reporting Company. If you have a friend with a small business organized as a corporation, like a contracting business or retail shop, their company would also likely qualify as a Reporting Company.

What does a Reporting Company have to do?

Under the terms of the CTA, a Reporting Company has to file a Beneficial Ownership Information Report (“BOI Report”) with the U.S Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). The BOI Report discloses the full name, residential address and driver’s license information of each beneficial owner of the Reporting Company. For example, the brother and sister with their Airbnb rental would need to file a BOI Report disclosing their identities.

What if you did not file the BOI Report?

As Matt Dorsey noted in his earlier articles, failure to file the BOI Report could lead to serious penalties, including a civil penalty of $500 for each day the violation continues (up to $10,000) and the potential for a criminal penalty of up to two years of imprisonment.

Was the CTA challenged in court?

The constitutionality of the CTA was challenged in federal courts in Alabama and Texas, among others. In December 2024 and January 2025, federal judges in the State of Texas issued nationwide injunctions that halted FinCEN’s enforcement of the CTA. However, after the U.S. Supreme Court removed the nationwide injunction of one federal judge, on February 17, 2025, the other federal judge in Texas lifted the only remaining nationwide injunction.

What did FinCEN do after the court challenges?

On February 19, 2025, FinCEN announced that the CTA would once again be effective and the new filing deadline for most entities would be March 21, 2025. However, in their announcement FinCEN suggested that an update would be provided by March 21, 2025, that could extend that deadline and issue further guidance on the applicability of the CTA.

What is the latest development?

The latest development is good news for U.S. companies. On March 21, 2025, FinCEN issued an interim final rule, effective as of March 26, 2025, which exempts corporate entities formed in the U.S. from the requirements of the CTA by removing U.S. corporate entities from the definition of a “Reporting Company”. As a result, our example of the brother and sister team owning an Airbnb rental in an LLC is no longer required to file a BOI Report – or be subject to the serious penalties if they fail to do so.

Why did FinCEN exempt U.S. companies?

The interim final rule states that FinCEN is exercising its authority under the CTA, which allows the Secretary of the Treasury, Attorney General and Secretary of Homeland Security to determine which entities should be exempt from the CTA. Ultimately, those government officials determined that most of the corporate entities formed in the U.S were small businesses owned by hard-working American taxpayers who do not engage in illegal activity, and that the burden of compliance outweighed the benefit.

What happens next?

The public may submit written comments on FinCEN’s interim final rule until May 27, 2025. All comments will be considered when the final rule is issued, which is expected to be sometime later this year.

What if you already filed a BOI Report?

Many corporate entities formed in the U.S., which were previously considered Reporting Companies, have already filed BOI Reports with FinCEN. It is unclear at this time what will happen with that data, if the final rule exempts those entities from compliance.

It is difficult for business owners to ensure they are complying with all applicable laws and regulations. It is especially difficult when the legal landscape swiftly shifts, as was the case with the Corporate Transparency Act. When dealing with business compliance matters, it is always useful to seek counsel from attorneys who keep track of such developments. Failure to comply could result in otherwise avoidable fines and harsh punishments.
James D. Wighaus is an Associate Attorney with O’Connell and Aronowitz, 54 State Street, Albany, New York. James’ practice is focused in the areas of corporate law, and trusts and estates law, including estate planning, long-term care planning, estate tax planning and estate administration. James can be reached at (518) 694-5698, jwighaus@oalaw.com and www.oalaw.com.