Only Foreign Entities Need to Report Under the CTA

On March 21, 2025, the Financial Crimes Enforcement Network (FinCEN), a bureau of the Treasury Department, issued a new interim final rule on reporting under the Corporate Transparency Act (CTA). The new rule drastically narrows the scope of reporting under the CTA to apply only to foreign entities that register to do business in the U.S.  No entities formed in the U.S. will be required to report.

Only entities formed in a foreign country that directly register to do business in the U.S. are required to file a beneficial ownership information report (BOIR). For existing foreign entities registered to do business in the U.S., a BOIR is due within 30 days of publication of the new interim final rule in the federal register. For foreign entities that subsequently register to do business in the U.S., a BOIR is due within 30 days of such registration.  Beneficial owners of a foreign reporting company who are U.S. persons will not be required to submit beneficial ownership information in a foreign entity BOIR. If a foreign reporting company has only U.S. beneficial owners, then the foreign reporting company will be exempt from filing a BOIR.

The interim final rule and its supporting memorandum do not make clear what will happen to the existing BOIR reports that have previously been filed by domestic entities or who will continue to have access to these BOIRs.  However, the new rule makes clear that no subsequent reporting to correct a BOIR or to file an initial BOIR is required by any domestic entities at this time.

The CTA statute as codified at 35 U.S.C. § 5336 contains reporting requirements for domestic entities and specifically exempts only certain domestic entities (large companies, nonprofits, insurance, securities brokers, etc.). The new interim final rule relies on statutory text in the CTA delegating power to the Treasury Secretary to exempt certain entities to exclude all domestic entities from reporting.  The Treasury Department’s role in promulgating regulations under the statute is to implement the CTA. Because the law is clearly intended to apply to both domestic and foreign entities and the interim final rule swallows the statute by only requiring foreign entities to report, the new rule may draw a legal challenge as an unreasonable interpretation of the statute.

The new rule will be open to comment for 60 days after publication in the federal register.  FinCEN intends to issue a final rule later this year.  Under the new rule, the CTA will only apply to foreign entities.  However, it will require legislative action to permanently change the reporting requirements to only apply to foreign entities. It is possible that the Trump administration will work with Congress to introduce new legislation to limit the application of the CTA to only foreign entities. However, without a change in the statute, CTA reporting requirements for domestic entities may reemerge in the future.

There are also a number of continuing lawsuits at both the district court and appellate level challenging the constitutionality of the CTA. Clark Hill’s CTA Task Force will continue to monitor for updates to the CTA and is available to counsel clients on reporting and compliance requirements.

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