FinCEN Narrows Beneficial Ownership Information Reporting Rule
Commentary by Andrew Lom
The Financial Crimes Enforcement Network ("FinCEN") adopted an interim final rule to narrow the existing beneficial ownership information ("BOI") reporting requirements under the Corporate Transparency Act ("CTA"). (See related coverage.)
Under the revised rule, "entities previously defined as 'domestic reporting companies' are exempted from the reporting requirements and do not have to report BOI to FinCEN, or update or correct BOI previously reported to FinCEN." FinCEN stated that the revised rule "otherwise retains the requirement for foreign reporting companies, and their beneficial owners (excluding U.S. persons), to report their BOI to FinCEN." FinCEN further clarified that this change was made after assessing that requiring such information "would not serve the public interest" and "would not be highly useful in national security, intelligence, and law enforcement agency efforts."
FinCEN extended the compliance deadline to 30 days after publication in the Federal Register. Comments are due within 60 days of publication in the Federal Register and the rule becomes effective upon date of publication in the Federal Register.
FinCEN also noted that it "intends to issue a final rule this year."
Commentary
A fair amount of the information that would have been collected from domestic reporting companies is already reported to the IRS in the ordinary course of filing annual corporate, partnership and individual tax returns. But many in government argue that this exemption swallows the rule and should not be allowed. Senators Grassley and Whitehouse have written a letter along those lines. (See here.) So, it is important to appreciate that this is an interim rule, and it may yet be challenged in court as giving too broad an exemption, similar to how the prior rule was challenged as capturing too broad a swath of American businesses.
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