One week left to comment on rule ending BOI reporting

Stakeholders have one more week to tell the federal government what they think about an interim final rule that exempts Americans from filing a beneficial ownership information report.

In March, the Financial Crimes Enforcement Network (FinCEN) submitted an interim final rule modifying the Corporate Transparency Act. All U.S. companies and individuals were taken off the hook to file a beneficial ownership information report. Foreign companies must continue complying with the new reporting rules.

FinCEN’s interim final rule relieved millions of small businesses from uncertainty and confusion caused by a series of court orders that stopped and restarted beneficial ownership information reporting requirements. Before the last court order revived BOI reporting, FinCEN told the court it would extend the reporting deadline while it figures out the next steps.

According to the interim final rule, only foreign companies must submit a beneficial ownership information report. However, foreign companies owned by U.S. citizens are exempt. The rule also exempts foreign companies from reporting the beneficial ownership information of any U.S. persons who are beneficial owners of the company. If all beneficial owners are U.S. persons, the foreign company does not have to file a report.

New requirements exempting American companies and individuals went into effect immediately on March 26. FinCEN used an interim final rule to circumvent the standard notice-and-comment procedure. After a 60-day comment period, FinCEN may tweak the interim final rule before formalizing it.

As of May 19, nearly 80 comments have been received, with the vast majority supporting the modified requirements. Several commenters are asking FinCEN to purge the existing database of beneficial ownership information reports already filed.

However, a few stakeholders believe FinCEN’s interim final rule is going too far. CTAboi LLC, a BOI filing company, said the rule “should have used a scalpel when instead it used a wrecking ball.” Martin Snodgrass, a retired attorney, suggested the interim final rule undermines the point of beneficial ownership information reporting, which is to combat money laundering and other illicit financing.

“Tax evasion, money laundering, foreign and domestic terrorism and drug trafficking are a few of the myriad crimes that could easily be exposed through this simple transparency requirement,” Snodgrass stated in submitted comments. “This is not a business-friendly rule; it is a criminal-friendly rule.”

Public comments are being accepted through May 27. To submit comments, click here.

There are legitimate concerns over the legality of FinCEN’s interim final rule. In a Bloomberg Law op-ed, attorneys at the corporate law firm Stinson suggested the rule is ripe for legal challenges. Although the Corporate Transparency Act allows for additional exemptions to limit the burden on companies required to submit a beneficial ownership information report, the attorneys argued FinCEN’s sweeping exemption to all U.S. companies goes against the intent of Congress.

Several senators have also questioned FinCEN’s decision. Sens. Charles Grassley, R-Iowa, and Sheldon Whitehouse, D-R.I., asked Treasury Secretary Scott Bessent to provide the legal basis for the department’s decision. The senators expressed concerns about severely gutting the Corporate Transparency Act.

“This is a matter of public and congressional accountability and ensuring that relevant policy interests underlying the (Corporate Transparency Act) are satisfied,” the senators wrote in the letter. “We encourage you to fully implement the (Corporate Transparency Act) so that law enforcement agencies around the country have access to information necessary to prevent human trafficking, terrorist financing, border smuggling, drug distribution and many other categories of criminal activity.”

Meanwhile, Republican members of Congress are trying to eliminate the Corporate Transparency Act through legislation. The Repealing Big Brother Overreach Act would repeal the Corporate Transparency Act and its beneficial ownership information reporting requirements. The House version has 141 co-sponsors, while the Senate bill has 29 co-sponsors, with no Democrats supporting either. LL