Key Takeaways
- Last week, after winning a motion that brought the Corporate Transparency Act (CTA) back into effect, the Financial Crimes Enforcement Network (FinCEN) extended the CTA reporting deadline to March 21 for nearly all companies.
- On Feb. 27, FinCEN announced that it plans to further extend the current CTA reporting deadlines and that it will not take any enforcement action for reporting failures until after the new deadlines have passed.
- FinCEN stated that it intends to issue an interim final rule establishing these dates prior to March 21.
- FinCEN’s announcement also reiterated that it intends to initiate a proposed rulemaking process later this year to revise the existing beneficial ownership information (BOI) reporting rules to reduce the regulatory burden on lower-risk entities.
Continuing on its roller coaster of the past few months, CTA compliance is effectively back on hold after FinCEN announced that it plans to further extend the existing reporting deadlines. Below, we address some of the key questions and concerns businesses may have following this announcement.
Didn’t FinCEN just recently extend the CTA reporting deadline to March 21? Would this be a different extension?
Yes and yes. On Feb. 17, after months of litigation fighting multiple district court orders that temporarily blocked the CTA, the U.S. government won a motion that brought the CTA back into effect. On Feb. 19, FinCEN extended the BOI reporting deadlines for nearly all reporting companies to March 21, with limited exceptions for certain reporting companies that already benefited from a later reporting deadline (the Current Deadlines).
On Feb. 27, FinCEN announced that it plans to further extend the Current Deadlines to a later, yet-to-be-announced date (the New Deadlines).
What are the New Deadlines?
We do not currently know. FinCEN’s notice did not specify what the New Deadlines would be or hint at any possible ranges being considered.
When will we know the New Deadlines?
We should know by March 21. In its press release, FinCEN stated that it plans to issue an interim final rule on or prior to that date to establish the New Deadlines.
What is the current status of the CTA?
Technically, the CTA—and the Current Deadlines—are still in effect. And they will remain in effect until the interim final rule is effective.
Does that mean we need to file by the Current Deadlines if the interim final rule is not effective by those dates?
No. FinCEN publicly confirmed that it will not seek enforcement against any companies based on any failure to file or update BOI reports by the Current Deadlines. According to its press release, “no fines or penalties will be issued, and no enforcement actions will be taken,” until after the interim final rule becomes effective and the New Deadlines have passed.
In other words, a reporting company will be at risk of a fine, a penalty or another enforcement action only if it fails to file or update a BOI report by the New Deadline applicable to such reporting company.
If my company had to file a BOI report by the Current Deadline, does that mean we will need to file our BOI report by the New Deadline?
Yes, but that could change. In its announcement, FinCEN again reiterated that it intends to initiate a proposed rulemaking process to revise the existing BOI reporting rules to reduce the burden on lower-risk entities (the Revised Rules). FinCEN has not indicated what types of revisions are being considered for the Revised Rules, only that the intention is to “reduce” or “minimize” the regulatory burden on lower-risk entities, including small businesses.
In the context of CTA reporting, reducing or minimizing the regulatory burden could include:
- Creating new exemptions, or expanding the existing exemptions, to the definition of a reporting company
- Reducing the type or amount of information that is required to be disclosed in a BOI report
- Narrowing the definition of who is considered a “beneficial owner”
- Streamlining how to report indirect beneficial ownership through affiliated reporting companies
- Extending the reporting deadlines for newly formed entities
- Limiting the obligation to file an updated BOI report to certain material changes
If the Revised Rules create a new exemption that applies to my company, does that mean we would no longer need to file a BOI report?
Maybe. However, the ultimate impact on any reporting company’s filing obligations under the CTA will depend on the effective dates of the Revised Rules and the New Deadlines, the final language of the Revised Rules, any subsequent guidance from FinCEN, and the facts and circumstances that are unique to that reporting company.
We will continue to provide updates regarding further material developments as they arise.
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