On March 21, FinCEN, the U.S. Treasury Department’s financial crimes unit issued an interim final rule that effectively ends the requirement for U.S.-based businesses to report beneficial ownership information.

  • Beneficial ownership information refers to the individual people who directly or indirectly own at least 25% of a company or exercise “substantial control” over the company.
  • The vast majority of PPAI’s roughly 15,000 member companies would have been subject to the reporting requirement.

The new rule states:

FinCEN is adopting this interim final rule to narrow the existing beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (CTA) to require only entities previously defined as “foreign reporting companies” to report BOI.  Under this interim final rule, entities previously defined as “domestic reporting companies” are exempted from the reporting requirements and do not have to report BOI to FinCEN, or update or correct BOI previously reported to FinCEN.

Earlier this month, Treasury Secretary Scott Bessent announced that the department would not enforce the much-contested requirement for U.S. businesses under the Corporate Transparency Act. The law has drawn multiple legal challenges across the country, resulting in conflicting decisions. Its stated purpose was to prevent the formation of shell companies used to launder money.

Under this new rule, only foreign companies must report beneficial ownership information – with two key exceptions:

  • Foreign reporting companies are exempt from having to report the BOI of any U.S. persons who are beneficial owners of the foreign reporting company.
  • U.S. persons are exempt from having to provide such information to any foreign reporting company for which they are a beneficial owner. 

Background On BOI Reporting

Since late 2022, the Treasury Department had been creating BOI reporting rules in order to ultimately establish a database of personal information for tens of millions of business owners as an organizational tool to curb financial crimes (chiefly money laundering).

Every business entity created by filing a document with a secretary of state or equivalent office would have had to file a BOI report, unless it qualified for one of 23 exemptions. Small businesses with fewer than 20 employees and less than $5 million in gross receipts were on the hook to file. This describes the vast majority of PPAI member firms.

  • Steep fines had been established for businesses that qualified but did not comply with the reporting rules.

Writing for Law360, Natalie Olivo reports that FinCEN had estimated in 2022 that about 33 million small businesses would be subject to the reporting requirements, which would create $21.7 billion in total compliance costs in their first year and $3.3 billion annually in future years.

After President Donald Trump issued an executive order in January that called for agencies to “alleviate unnecessary regulatory burdens,” the agency reassessed the potential benefits versus burdens of the reporting requirement and determined that foreign reporting companies posed greater “national security and illicit finance risks” than domestic enterprises.

For questions or suggestions on regulatory or government affairs issues, please contact Rachel Zoch at RachelZ@ppai.org.