Accounting
FinCEN rule removes CTA’s BOI requirements for US companies
The Treasury Department’s Financial Crimes Enforcement Network issued an interim final rule Friday removing the requirement under the Corporate Transparency Act for U.S. companies and people to report beneficial ownership information to FinCEN.
In the interim final rule, FinCEN revised 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 move reflects an
Under the interim final rule, all entities created in the United States — including those previously known as “domestic reporting companies” — and their beneficial owners will be exempt from the requirement to report BOI to FinCEN. Foreign entities that meet the new definition of a “reporting company” and do not qualify for an exemption from the reporting requirements must report their BOI to FinCEN under new deadlines, detailed below. These foreign entities, however, will not be required to report any U.S. persons as beneficial owners, and U.S. persons will not be required to report BOI with respect to any such entity for which they are a beneficial owner.
Upon the publication of the interim final rule, the following deadlines will apply for foreign entities that are reporting companies:
- Reporting companies registered to do business in the U.S. before the date of publication of the interim final rule must file BOI reports no later than 30 days from that date.
- Reporting companies registered to do business in the U.S. on or after the date of publication of the IFR have 30 calendar days to file an initial BOI report after receiving notice that their registration is effective.
FinCEN said Friday it’s accepting comments on this interim final rule and intends to finalize the rule this year.
If finalized, the rule would exempt more than
“Treasury’s proposal contradicts decades of evidence that sanctions evaders, tax cheats, and fentanyl traffickers rely on anonymous U.S. companies to stash their illicit cash in the U.S. financial system,” said Ian Gary, executive director of the FACT Coalition, in a statement Friday. “This decision is tantamount to nullifying the statute and is very unlikely to be upheld in court. Treasury must take these legal and constitutional considerations into account as part of the rulemaking.”
The interim final rule is designed to formalize unusually abrupt announcements made earlier this month by the Treasury Department and President Trump that the Treasury would halt enforcement of the CTA, advocates noted. The announcements were made despite the fact that the law passed with the support of the first Trump administration.
“District attorneys around the country strongly support the Corporate Transparency Act as an indispensable tool for combating the fentanyl epidemic, transnational crime, terrorism financing, and other illicit activities,” said Nelson Bunn, Executive Director of the National District Attorneys Association, in a statement. “Access to beneficial ownership information is a necessity for prosecuting crimes. Treasury’s interim final rule threatens to deny law enforcement the vital information they need to pursue illegitimate business fronts that jeopardize U.S. national security and public safety. If finalized without amending, this proposal will undermine Congress’s intent and stunt efforts to achieve justice across the nation.”
The CTA was signed into law as part of the National Defense Authorization Act of 2021 and requires individuals with an ownership interest in a limited liability company to disclose personal data to the Treasury Department’s Financial Crimes Enforcement Network as a way to deter illicit activity such as money laundering, tax fraud, drug trafficking and terrorism financing by anonymous shell companies. Failure to comply could result in up to two years of jail time and a $10,000 fine per violation.
Under the CTA
“Today’s decision threatens to make the United States a magnet for foreign criminals across the world,” said Scott Greytak, director of advocacy for Transparency International U.S., in a statement. “The decision tells criminals — fentanyl traffickers, human traffickers, terrorist organizations, corrupt officials — that they can evade the most powerful anti-money laundering law since the PATRIOT Act by choosing to set up a shell company for their criminal operations anywhere in the United States.”
The National Federation of Independent Business, a small business advocacy organization that had sued to stop the Corporate Transparency Act, praised the interim final rule.
“NFIB has been steadfast since the beginning that this onerous requirement is a massive intrusion into small businesses’ privacy and creates an unprecedented new government database on Americans. We agree with President Trump that requirements from the Corporate Transparency Act are ‘outrageous and invasive,'” said NFIB president Brad Close in a statement. “NFIB will continue to work with Congress to put the Administration’s actions into law and repeal the CTA fully. Furthermore, Congress should direct FinCEN to immediately destroy all of the data that was already submitted by small businesses out of fear they would face fines and prison time.”
The American Institute of CPAs is asking the Treasury Department and the Internal Revenue Service for greater clarity on their
SECURE 2.0, like the original SECURE (Setting Every Community Up for Retirement Enhancement) Act of 2019 includes a
The Treasury and the IRS
The requirement generally applies to 401(k) and 403(b) plans established after Dec. 29, 2022, which is the date when the SECURE 2.0 Act became law, but there are some exceptions for new and small businesses, church plans, and governmental plans.
Based on the recent proposed regulations, the AICPA made several recommendations in its
In determining the employee count for small businesses, the AICPA recommended that the Treasury and the IRS issue final regulations stating that only employees of the plan sponsor are included in the count for purposes of determining status as a small business under Section 414A.
The AICPA also had a comment on the definition of “predecessor employer,” suggesting that the Treasury and the IRS issue final regulations that define the term by reference to Treas. Reg. Section 1.415(f)-1(c)(2) for purposes of Section 414A(c)(4)(A).
“The purpose for our letter is to provide input to Treasury and the IRS in order to further clarify the rules and provide recommendations to help with the implementation of the auto-enrollment provision of the law,” said Kristin Esposito, AICPA director of tax policy and advocacy, in a statement Tuesday.
The Public Company Accounting Oversight Board sanctioned James PAI CPA and its sole owner and partner Yu-Ching James Pai for audit failures.
The PCAOB found that Pai and his firm violated multiple PCAOB rules and standards in connection with two audits of one issuer client, that the firm violated quality control standards, and that Pai directly and substantially contributed to those violations. In the audits, the firm and Pai failed to perform risk assessments and obtain sufficient audit evidence in multiple areas, including revenue and related party transactions.
“Performing appropriate risk assessments and obtaining sufficient evidence are fundamental to an audit, and failure to meet these most basic requirements puts investors at risk,” PCAOB chair Erica Williams said in a statement.
The PCAOB also found that, in the audits, the firm failed to perform engagement quality reviews, obtain written representations from management, comply with requirements concerning critical audit matters and audit committee communications and documentation, and establish a system of quality control.
“Issuing an audit report stating that the audit was performed in accordance with PCAOB standards is a solemn commitment to the investing public, and serious consequences can follow when an auditor fails to meet that commitment,” Robert Rice, director of the PCAOB’s Division of Enforcement and Investigations said in a statement.
Without admitting or denying the findings, Pai and the firm consented to the PCAOB’s order, which:
- Censures Pai and the firm and imposes a $40,000 civil money penalty, jointly and severally, against them;
- Revokes the firm’s PCAOB registration with a right to reapply after three years;
- Bars Pai from being an associated person of a PCAOB-registered firm, with a right to petition the Board to terminate his bar after three years;
- Requires the firm to undertake remedial actions to improve its system of quality control and procedures before reapplying for registration; and,
- Requires Pai to complete 40 CPE hours before seeking to terminate his bar.
Bridgewater Associates founder Ray Dalio warned House Republicans of the dangers of rising U.S. deficits and urged them to cut the budget deficit to just 3% of gross domestic product or risk debt service costs squeezing government spending.
Dalio’s message of austerity comes as House and Senate Republicans battle over the size of spending cuts to be paired with a giant tax cut coming later this year. The U.S. budget deficit was 6.6% of GDP in 2024, according to the Congressional Budget Office.
“There was a good understanding of the choices and the possibilities to manage this dire situation over time,” Dalio said in a statement after the meeting. “I look forward to staying in touch about these issues and having similar discussions with others so that there are realistic assessments of the issues and what might be done to deal with them.”
The House has drafted a $4.5 trillion tax cut blueprint paired with $2 trillion in spending cuts over ten years, which would add about $3 trillion to deficits over the decade. Senate Republicans want to deploy a budget gimmick to allow them to add trillions more in tax cuts without more spending cuts. House and Senate GOP leaders will work to resolve their differences in a meeting with Treasury Secretary Scott Bessent later Tuesday.
After the Dalio meeting, House Budget Chairman Jodey Arrington said he’s resolved to block any Senate tax plan that lacks sufficient spending cuts, saying it would be dead on arrival in the House. But Arrington also acknowledged that the House’s own budget blueprint fails to meet Dalio’s 3% GDP target.
“This is not something you accomplish in one bill,” he said. “We need to begin exercising the spending cut muscles.”not supported.
Representative David Schweikert, an Arizona Republican, said Dalio’s message means Congress must pass spending cuts to pay for their plans to make President Donald Trump’s expiring 2017 tax cuts permanent as well as any new tax cuts.
Dalio has been warning for some time that the U.S.’s growing debt burden threatens the country’s financial stability, an argument he advances in a forthcoming book: How Countries Go Broke: The Big Cycle.
“We are at a precarious time in what I call the Big Cycle, where there is a confluence of major forces playing out in a way that is similar to many times in history,” Dalio said in a statement released in advance of the meeting.
Dalio, 75, stepped down as co-CEO of Bridgewater in 2017 and
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