As we reported in our client alert from November 5, 2024, the 2021 Corporate Transparency Act (“CTA”) requires “reporting companies” to file beneficial ownership information (“BOI”) with the Financial Crimes Enforcement Network (“FinCEN”). There has been a relentless back and forth of rulemaking and litigation efforts initiated last year to halt enforcement of the CTA, as indicated in our previous alert of February 20, 2025. The CTA has civil and criminal penalties for failure to comply, including fines of up to $10,000 and imprisonment of up to 2 years. Or, to be more precise, the CTA used to have these penalties.
On February 27, 2025, FinCEN announced that it will not issue any fines or penalties against companies for failure to file or update their BOI reports until a forthcoming interim final rule becomes effective. Three days later, on March 2, 2025, the U.S. Treasury Department confirmed the prior statement, adding that it will further not enforce any penalties or fines associated with the BOI reporting rule against U.S. citizens, domestic reporting companies, or their beneficial owners even after the forthcoming rule changes take effect. The Treasury Department also plans to propose rulemaking to limit the reporting rule to foreign reporting companies only.
So, what we’re left with is a BOI reporting requirement that will be enforced only against non-domestic reporting companies and their non-U.S. citizen beneficial owners. The CTA is still, however, on the books and it is possible that it could be enforced against U.S. citizens and domestic reporting companies sometime in the future.
Bottom line?
The safest course is to stay up to date on this quickly changing legal landscape and to be prepared to file a BOI report if the enforcement policies change again.
If your company has already filed its initial BOI report, no action is needed at this time. If your company is classified as a foreign reporting company under the Act and has not filed, we urge you to be prepared to file your initial report. Even if your company is not classified as a foreign reporting company, we encourage you to gather the information and materials necessary to file because, despite the current suspension, there are still active cases and bills that could quickly change the status of the reporting rule.
If your company is subject to the reporting requirements of the CTA, you should continue to carefully monitor these developments and be on the lookout for any further action or notice issued by FinCEN or the U.S. Treasury Department.