Key Takeaways
The CTA is not dead, but it is hanging by a thread.
On March 2, the U.S. Treasury Department (the Treasury) issued a press release announcing significant updates to the plans announced by FinCEN just a few days earlier. These updates effectively nullify the CTA for all U.S. reporting companies until further notice:
- Indefinite Suspension for U.S. Citizens and Companies:
- On Feb. 27, FinCEN announced that it would be suspending CTA enforcement until new rules have taken effect to further extend the reporting deadlines.
- On March 2, the Treasury took this a step further, stating that it also will not seek enforcement against any “U.S. citizens or domestic reporting companies or their beneficial owners” even after the new rules take effect.
- Extreme Narrowing of the Beneficial Ownership Information (BOI) Reporting Rule:
- On Feb. 27, FinCEN reiterated that it planned to initiate a rulemaking process later this year to “reduce” or “minimize” the reporting burdens of lower-risk entities.
- On March 2, the Treasury posted that this proposed rulemaking will seek to narrow the BOI reporting requirements to apply only to foreign reporting companies (i.e., non-U.S. entities that have registered to do business in the U.S.).
- In other words, it appears that the plan to reduce the reporting burdens for lower-risk entities is to add an exemption for all entities formed in the U.S., effectively gutting all but a fraction of the original reach of the CTA.
As a result of these updates, U.S. entities will effectively have no reporting obligations under the CTA unless and until (i) the final revised rules are not as expansive as described in the Treasury’s press release or (ii) the U.S. government announces a subsequent change to its enforcement policy.
As of the time of this publication, FinCEN’s BOI page had not yet been updated to reflect the policy changes signaled by the above announcements.
We will continue to provide updates regarding further material developments as they arise.
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