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In the latest twist to the rollout of the Corporate Transparency Act (CTA), the Trump administration has vowed to exempt US citizens and companies from its controversial beneficial ownership reporting requirements.
After months of lawsuits and counter-lawsuits between covered companies and the US government, the Treasury Department has abruptly announced that the CTA will apply only to foreign residents and companies.
Late on Sunday night (March 2), the Treasury confirmed that it will not enforce any penalties or fines associated with the CTA’s beneficial ownership information (BOI) reporting requirements.
“The Treasury Department will further be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only,” it said.
“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.”
Scott Bessent, Treasury secretary, described the plans as a “victory for common sense”.
“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,” he said.
President Trump also shared the “exciting news” to his Truth Social account, announcing to his followers that US citizens will be spared the CTA’s “outrageous” and “invasive” reporting requirements.
“This Biden rule has been an absolute disaster for small businesses nationwide,” he said.
“Furthermore, Treasury is now finalizing an Emergency Regulation to formally suspend this rule for American businesses.
“The economic menace of BOI information reporting will soon be no more.”
A fast-moving situation
The move marks a rapid shift from the Treasury’s prior position, which had been updated only three days earlier.
In a statement on February 27, the Financial Crimes Enforcement Network (FinCEN) announced that it would not issue any fines or penalties, or take any enforcement actions, against companies for failing to file or update their BOI.
FinCEN said that enforcement of the requirements would be put on hold until the agency has introduced a new implementing rule. However, it did not mention differentially applying the law to US versus foreign citizens or companies.
The regulator added that the new implementing rule would be issued no later than March 21, 2025; that it would extend the BOI reporting deadline (again); and that it would provide “new guidance and clarity” to reporting entities.
In the meantime, the agency said it would prioritise the application of the CTA to entities that pose the “most significant” law enforcement and national security risks — a category that, as sources have told Vixio, has not been clearly defined by FinCEN.
Small businesses welcome postponement, but would prefer repeal
Todd McCracken, president and CEO of the National Small Business Association (NSBA), said that FinCEN’s decision to hold off on enforcement was a “positive one”, but the law should still be opposed due to its excessive penalties.
“While we appreciate the restraint and understanding FinCEN appears to be showing about the massive burden BOI reporting poses for millions of small businesses, we urgently need Congress to intervene and pass legislation that doesn’t harm small businesses, and actually fixes the problem of money laundering,” he said.
McCracken has previously spoken out against the CTA’s harsh penalties: fines of up to $591 per day and two-year prison sentences for failing to report.
He has effectively had some, but not all, of his wishes answered by the Treasury’s latest move.
In November 2022, the NSBA filed the country’s first lawsuit against the Treasury in an effort to overturn the CTA and its reporting requirements, and it is currently awaiting judgment from the Eleventh Circuit Court of Appeals.
As McCracken noted, the NSBA is also working to encourage US lawmakers to delay and repeal the CTA, and has so far had some success.
In early February, the House of Representatives unanimously passed HR 736, a bill that would push back the deadline for the BOI reporting requirements to January 1, 2026.
The bill was received by the Senate, but no further actions have been taken by lawmakers since then.
