Treasury Department Limits Enforcement of Corporate Transparency Act

The U.S.Treasury Department announced on March 2, 2025, that it will not enforce penalties or fines under the Corporate Transparency Act (CTA) against U.S. citizens or domestic reporting companies or their beneficial owners.

“The Treasury Department is announcing today that, with respect to the Corporate Transparency Act, not only will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines, but it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either,” said a Treasury Department press release.

Deadline to File Had Been Extended to March 21

The deadline for businesses formed before 2024 to submit Beneficial Ownership Information Reports (BOIR) under the CTA had been extended from Jan. 1, 2025, to March 21, 2025, for most companies.

The Wall Street Journal reported that the U.S. government’s Financial Crimes Enforcement Network (FinCEN) said it plans before March 21 to issue an interim rule that extends the reporting deadlines and provides new guidance and clarity.

“The Treasury Department will further be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only. Treasury takes this step in the interest of supporting hard-working American taxpayers and small businesses and ensuring that the rule is appropriately tailored to advance the public interest,” said the Treasury Department release.

The Wall Street Journal reported that the Trump Administration’s announcement came as the CTA was put in effect again after a federal judge in Texas reversed a national injunction last month.

“This is a victory for common sense,” said U.S. Secretary of the Treasury Scott Bessent.  “Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy.”

Businesses that failed to file by the March 21 deadline had been under the threat of fines up to $591 per day, with a maximum fine of $10,000.

Background on the Corporate Transparency Act

The CTA was an effort to prevent corrupt actors from laundering illicit funds through anonymous companies in the United States. Enacted by Congress in 2021, the CTA required many companies formed or operating in the United States to report information about their beneficial owners to FinCEN.

After the CTA was passed, FinCEN issued the beneficial ownership information (BOI) reporting rule in September 2022.

The BOI reporting rule describes who must file a BOI report, what information must be reported, and when the report is due. The BOI reporting rule also says:

• Beginning Jan. 1, 2024, reporting companies established before this date will have until Jan. 1, 2025, a full year to submit their initial report. (This was extended later to March 21, 2025).
• Reporting companies created between Jan. 1, 2024, and Jan. 1, 2025, will have 90 days from actual notice of formation or public announcement (whichever is first) to file their BOI.
• After Jan. 1, 2025, newly established businesses will have 30 days to file their BOI.

“According to the CTA, an individual qualifies as a beneficial owner if they directly or indirectly have a significant ownership stake in a company. This person either has a major influence on the reporting company’s decisions or operations, owns at least 25 percent of the company's shares, or has a similar level of control over the company's equity,” said the U.S. Chamber of Commerce. “All reporting companies must provide their legal name and trademarks, as well as their current U.S. address, which could be either the address of its main business site or, for foreign-based companies, their U.S. operational location. They’ll also need to provide a taxpayer identification number and specify the jurisdiction where they were formed or registered.”

Businesses do not incur a fee for submitting their reports, and electronic forms are available on FinCEN’s website.

Which Businesses Were Exempt from Filing the BOI

The International Association of Commercial Administrators (IACA) says some businesses are exempt from filing a BOI report including:

• The CTA lists 23 categories of entities that were exempt from reporting. View the list of exemptions here: https://www.fincen.gov/boi-faqs. This list includes banks, credit unions, insurance companies, accounting firms, large operating companies (employs more than 20 full-time employees in the U.S. with a physical address in the U.S. and more than $5 million in gross receipts or sales), and others.
• Many of the exempt categories are already subject to similar regulations such as banks, credit unions, tax-exempt entities, public utilities, and large operating companies.
• Business entities that did not fall within the scope of the reporting requirements included sole proprietorships, some general partnerships, foreign entities not registered to do business in the U.S., unincorporated associations, and wealth planning trusts.
• Tax-exempt entities were also exempt from the CTA filing requirements. These entities include any organization that is described in section 501(c) of the Internal Revenue Code and exempt from tax under section 501(a).

What Information Was Reported on the BOI?

The following company information must be provided on the BOI report:

• The legal name of the company.
• Any trade name (DBA) used by the company.
• The current street address of its principal place of business. If the principal place of business is not in the U.S., then the company will report the address from which it conducts business in the U.S.
• Taxpayer identification number (EIN/SSN/ITIN, as appropriate).

And the following information was reported for each beneficial owner of the business:

• The individual’s legal name; date of birth and residential street address.
• A unique identifying number from an acceptable identification document.
• The name of the state or jurisdiction that issued the acceptable identification document.
• An image of the acceptable identification document.

Who are Beneficial Owners of a Reporting Company?

There are some nuances to the law on who is a beneficial owner of a reporting company, as it applies to more than just formal ownership.

“A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over the reporting company or owns or controls at least 25 percent of the reporting company’s ownership interests,” said the Treasury Department.

Substantial control, according to the rule, is defined as “an individual can exercise substantial control over a reporting company in four different ways. If the individual falls into any of the categories below, the individual is exercising substantial control:

• The individual is a senior officer (the company’s president, chief financial officer, general counsel, chief executive officer, chief operating officer, or any other officer who performs a similar function).
• The individual has the authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company.
• The individual is an important decision-maker for the reporting company.
• The individual has any other form of substantial control over the reporting company as explained further in FinCEN’s Small Entity Compliance Guide.

Powell Tax Law is here to help you with any IRS issues, and we will keep you updated on future CTA developments.