As expected, FinCEN issued a new “interim final rule” for the Corporate Transparency Act on Friday night that can be found by clicking here.
The phrase “interim final rule” sounds like an oxymoron, so let’s start with defining that. It refers to a rule issued by a government agency that takes effect immediately upon publication, without first going through the usual public comment period required for most regulations.
The motivation behind it is to address situations where immediate action is needed—for example, in emergencies or time-sensitive scenarios—and waiting for the standard process could cause harm or disruption. After the interim final rule is issued, the agency will open it up for public comments and may later amend or finalize it based on the feedback received.
According to the FinCEN website:
In that interim final rule, FinCEN revises the definition of “reporting company” in its implementing regulations to mean only those entities that are formed under the law of a foreign country and that have registered to do business in any U.S. State or Tribal jurisdiction by the filing of a document with a secretary of state or similar office (formerly known as “foreign reporting companies”). FinCEN also exempts entities previously known as “domestic reporting companies” from BOI reporting requirements.
The new rule limits the reporting requirement to entities that are formed under the laws of a foreign country and have registered to do business in any US jurisdiction. Further, foreign entities are not required to report any US persons (citizen or green card holder) as a beneficial owner, nor is any US person required to report.
For example, if two Canadians form a Michigan LLC, they do not need to report. And if two Michiganders form an Ontario corporation that is registered to do business in Michigan, the Ontario corporation is not required to report the American owners. It might even be the case that a Canadian corporation that forms a Michigan LLC and is the sole member of that LLC would not have to report.
As an attorney recently shared with me: “at this point, the scope of the CTA seems so narrow, at least under the proposed rule, that it will only apply to the uninformed or uncreative.”
This new rule alleviates many of our immediate concerns with the Corporate Transparency Act, though as long as the original Act remains in Law, it could come back at any point in the future through purely administrative means. The interim final rule is good, but we still need the Act to be struck down or repealed.
If you are reading this and are a “foreign reporting company,” you have 30 days to make your first report from when the rule was published. And by the way, if you do believe you still fall under this reporting requirement, we would love to hear from you. Kindly email us at SBAM@SBAM.org and let us know.
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