On 2 March 2025, the U.S. Department of the Treasury announced that U.S. citizens and businesses would not face penalties for violations of the Corporate Transparency Act (CTA).
In addition to waiving enforcement actions, authorities also plan to exempt domestic companies from the requirement to report their beneficial owners.
Exemption from fines and penalties
The Department’s press release states that failing to report information about beneficial owners within the deadlines set by current regulations will not incur fines or penalties. The following persons and entities will be exempt from enforcement actions:
- U.S. citizens,
- U.S. reporting companies and
- their beneficial owners.
Furthermore, the requirement to declare beneficial ownership information is expected to be narrowed, applying only to foreign reporting companies. This means that U.S. companies will be completely exempt from this obligation, and it will only apply to foreign companies operating in the United States.
According to Scott Bessent, the Secretary of the Treasury, these measures are part of President Trump’s initiative to reduce excessive regulations in favour of small businesses and American taxpayers.
Background
Earlier, we informed that mandatory beneficial ownership information reporting was introduced in the United States on 1 January 2024. The Corporate Transparency Act aims to combat money laundering, tax fraud and other offences using companies whose actual owners remain unknown.
Under the Act, U.S. companies are required to report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). This filing is done electronically, and the submitted information will not be accessible to the general public. FinCEN can share data from the national database of company beneficial owners only with law enforcement and regulatory agencies, as well as some compliance officers in the private sector.
The requirement for reporting beneficial ownership information has both active supporters and opponents. The Act came into force in 2021, but its implementation has been repeatedly postponed. There have been attempts to challenge its constitutionality, along with efforts to block the Act’s implementation through court injunctions, which were only partially overcome in the Supreme Court.
The latest proceedings led to the lifting of the nationwide ban, and the deadline for submitting beneficial ownership information was set for 21 March 2025. However, FinCEN announced that it would not take any enforcement action against those who violate this requirement. Shortly after, the U.S. Treasury Department confirmed this stance in the above-mentioned statement.
Key takeaways
- If the announced changes are implemented, they will reduce the administrative burden on American companies, particularly small businesses. U.S. companies and their beneficial owners will no longer have to worry about fines for not complying with the CTA requirements related to reporting their beneficial ownership information to FinCEN.
- Relying on the Treasury Department’s statement, the requirement to report beneficial owners to FinCEN will still apply to “foreign reporting companies.” This refers to organizations (including corporations and limited liability companies) established under the laws of a foreign state and registered to operate in the United States. This definition does not cover companies that are incorporated in the United States but have foreign owners.
- Both existing businesses and those planning to start a company in the United States should be aware of the frequent changes related to the implementation of the CTA. Advocates for corporate transparency highlight the risks associated with the recent decision and plan to seek its reversal. We recommend keeping an eye on future decisions by the regulatory authority regarding the scope of entities required to report on beneficial ownership and their responsibilities.