In a welcome move for the small business community in the United States, the Financial Crimes Enforcement Network (“FinCEN”) has issued an “interim final rule” removing the beneficial ownership interest (“BOI”) reporting requirement for U.S. entities.
Over the past two years, small business owners, lawyers, accountants, lawmakers, and bureaucrats have been wrestling to understand, manage, and comply with the 2021 Corporate Transparency Act’s (“CTA’s”) BOI reporting requirement that every domestic entity (with limited exceptions) report to the federal government the identities of holders of beneficial ownership interests of 25% or more of every entity. The requirement represented a sea change in United States’ law surrounding privacy and corporate ownership, which has held that the ownership of privately held entities is confidential since before the birth of our nation.
Principle Law has been carefully tracking the evolution of the CTA’s BOI reporting requirements. Principle Law decided to suspend reporting activities for its clients in December of 2024 based on a United States District Court injunction of the requirements in the case of Texas Cop Shop Inc. v Garland in an effort to save client dollars spent complying with a requirement that might never be enforced, pending further court decisions and guidance from FinCEN.
Since then, the CTA’s BOI reporting requirement for U.S. companies was enjoined by another federal judge in the case of Smith v United States Department of the Treasury, the injunction in Texas Cop Shop was stayed by a panel Fifth Circuit Court of Appeals, the Texas Cop Shop injunction was reinstated by the Fifth Circuit en banc, then it was again stayed by the U.S. Supreme Court. The reporting requirement would have then been back in force, except the Supreme Court ruling did not address the Smith injunction, meaning that domestic U.S. entities were still not required to report until the Smith court later granted a stay on the injunction in February (in light of the U.S. Supreme Court’s Texas Cop Shop ruling).
Following these decisions, FinCEN issued a notice announcing the reinstatement of reporting requirements for U.S. companies on February 18, 2025. The reinstatement lasted for all of nine days, when, on February 27, 2025, FinCEN issued a news release that it would not issue fines or penalties or take enforcement action based on U.S. entities’ failure to file until an “interim final rule” was enacted.
If all of that is confusing and sounds like a legal mess, it was, and largely still is.
FinCEN eventually decided that enforcing U.S. BOI reporting requirements was too tall of a hill to clime in the face of pressure from interest groups, continued litigation, and pressure from the Trump Administration. On March 21, 2025, FinCEN issued a news release and Alert announcing its interim final rule removing the requirement for U.S. entities to report their BOI to FinCEN.
In the end, CTA’s BOI reporting requirement will not apply to U.S. entities, and the whole saga represents millions of dollars in wasted government and private efforts in complying with, enforcing, challenging, and modifying the requirements.
Principle Law applauds the intent of the CTA, which is to reduce money-laundering funding organized crime and terrorist organizations. However, we believe that small businesses in the U.S. already face an unreasonable regulatory compliance burden and support privacy rights, so we also applaud the interim final rule removing the U.S. entity reporting requirement.
We hope that, in the future, Congress and FinCEN finds more narrowly targeted methods to deter money laundering and funding for organized crime and terrorism that does not place an undue administrative burden on U.S. citizens or infringe on privacy rights of U.S. citizens.
Please do not hesitate to reach out to us if you have any questions or concerns about BOI reporting or any other compliance matter.