Beneficial Ownership Reporting: What the CTA Rules Mean Now
If you run a U.S.-formed business, you no longer have a federal obligation to file a beneficial ownership information (BOI) report with FinCEN. FinCEN’s final rule, effective August 14, 2026, permanently exempts all domestic entities from BOI reporting under the Corporate Transparency Act. The requirement now applies only to foreign-formed companies that have registered to do business in a U.S. state or tribal jurisdiction. Beneficial ownership reporting has not disappeared entirely, so finance leaders should understand exactly where the remaining obligations sit at the federal and state levels.
What the Corporate Transparency Act Was Designed to Do
Congress enacted the Corporate Transparency Act (CTA) in January 2021 as part of the National Defense Authorization Act. The law directed FinCEN to build a database of beneficial ownership information that law enforcement and certain financial institutions could query to detect money laundering, tax fraud, and other financial crimes carried out through anonymous shell companies.
The original rule, which took effect January 1, 2024, required most small corporations, LLCs, and similar entities to report identifying information for every individual who owns 25% or more of the company or exercises substantial control over it. An estimated 32 million businesses faced this obligation. The required data included legal name, date of birth, residential address, and a government-issued ID number for each beneficial owner.
The Legal Battles That Stalled Enforcement
From the moment the CTA reporting rule went live, it faced constitutional challenges in federal courts. Several district courts issued nationwide injunctions halting enforcement through 2024 and into early 2025. The legal questions centered on whether Congress exceeded its Commerce Clause authority and whether forced disclosure of private ownership data violated the Fourth Amendment.
The U.S. Court of Appeals for the Eleventh Circuit resolved the constitutional question on December 16, 2025, reversing a lower-court decision and holding that the CTA is a valid exercise of Congress’s Commerce Clause authority and does not facially violate the Fourth Amendment. That ruling made the statute itself legally defensible. But the constitutional green light did not revive broad enforcement, because FinCEN had already moved on a separate administrative track to narrow the rule dramatically.
The Pivotal Shift: FinCEN’s 2025 Interim Final Rule
On March 21, 2025, the Treasury Department and FinCEN announced an interim final rule that redrew the entire scope of the BOI reporting requirement. The rule took effect on March 26, 2025, and made one fundamental change: it revised the regulatory definition of “reporting company” to cover only entities formed under the law of a foreign country that have registered to do business in any U.S. state or tribal jurisdiction. The interim final rule in the Federal Register sets out the revised definition in full.
Every entity formed inside the United States, previously called a “domestic reporting company,” was removed from the definition entirely. With that single definitional change, FinCEN simultaneously:
- Suspended all BOI reporting obligations for U.S.-formed entities.
- Stopped enforcement of penalties against domestic businesses and their owners.
- Committed to deleting beneficial ownership data previously submitted by U.S. persons from its database.
FinCEN described the narrowing as a step to reduce regulatory burden on American small businesses while it developed a more targeted approach to beneficial ownership collection.
The August 2026 Final Rule Makes the Exemption Permanent
FinCEN converted the interim final rule into a permanent final rule effective August 14, 2026. The final rule locks in the domestic exemption and extends it further: foreign reporting companies are no longer required to report U.S.-person beneficial owners or U.S.-person company applicants. The only remaining federal BOI obligation under the CTA is for foreign-formed entities to disclose their non-U.S.-person beneficial owners to FinCEN.
In the Treasury announcement of the final rule, Secretary Scott Bessent framed the change as fulfilling a commitment to reduce compliance costs for the roughly 32 million entities estimated to have been subject to the original rule.
Who Still Has a Beneficial Ownership Reporting Obligation
As of September 2026, the federal BOI reporting obligation is narrow and focused. FinCEN maintains current guidance and filing resources on its beneficial ownership information page:
Subject to reporting:
- Entities formed under foreign law that are registered to do business in any U.S. state or tribal jurisdiction, and that do not qualify for one of the CTA’s statutory exemptions.
Not subject to reporting:
- All entities formed under U.S. federal or state law (corporations, LLCs, partnerships, etc.).
- U.S. persons in any capacity, including as beneficial owners or company applicants of a foreign reporting company.
Deadlines for Foreign Reporting Companies
Foreign entities that registered to do business in the U.S. before March 26, 2025, were required to file an initial BOI report by April 25, 2025. Foreign entities that registered on or after March 26, 2025, have 30 calendar days from the date they receive actual notice that their registration is effective to file an initial report. Updated and corrected reports remain due within 30 calendar days of any change.
The 23 statutory exemptions under the CTA, covering large operating companies, regulated financial institutions, SEC-reporting entities, and others, continue to apply to foreign reporting companies just as they applied to domestic ones. A foreign entity that meets one of those exemptions has no federal filing obligation.
The State-Level Picture: New York’s LLC Transparency Act
The federal exemption does not preempt state transparency laws, and New York enacted its own regime. The practical scope of that law, however, ended up narrower than many observers expected.
New York’s LLC Transparency Act took effect on January 1, 2026. As originally written, it would have required a broad population of LLCs, including those formed in New York, to file beneficial ownership disclosures with the New York Department of State. Because the state law cross-references the federal Corporate Transparency Act, and because FinCEN narrowed the federal rule to foreign entities in 2025, the New York statute now tracks that same narrowed scope.
Governor Hochul vetoed a decoupling amendment in December 2025 that would have kept New York’s broader reporting obligation in place independent of the federal rule. With that veto, the New York law as effective in 2026 applies only to LLCs formed outside the United States that are authorized to do business in New York. U.S.-formed LLCs, including those organized in New York, are exempt from reporting under the current version of the state law.
Deadlines under the New York law mirror a similar structure to the federal one. A foreign LLC authorized in New York before January 1, 2026, must file its initial disclosure by December 31, 2026, while one authorized on or after that date files within 30 days of its application for authority. Annual disclosure statements follow, each carrying a $25 fee.
Other states are watching how New York’s law functions in practice. Finance leaders and business owners with multi-state operations should confirm whether any state where their entity is registered to do business has enacted or is considering its own disclosure requirements, since state legislatures can move independently of FinCEN.
What This Means for Financial Institutions
Banks, credit unions, and other covered financial institutions face a related but distinct obligation. FinCEN’s Customer Due Diligence (CDD) Rule, separate from the CTA reporting rule, requires financial institutions to collect beneficial ownership information from their legal-entity customers as part of account-opening and ongoing monitoring procedures. That obligation remains in effect regardless of the CTA’s domestic exemption.
FinCEN acknowledged in the August 2026 final rule that it is legally required to modify the CDD Rule in light of the narrowed CTA reporting rule, and the agency signaled future rulemaking in that area. Financial institutions should monitor FinCEN guidance closely, because the CDD Rule governs what you disclose to your bank, not what you file with a federal database.
Should Domestic Businesses Preserve Their BOI Data?
Even though the federal filing obligation is gone for domestic entities, several considerations argue for maintaining your beneficial ownership records internally.
The exemption could be reversed. Regulatory priorities shift with administrations. Congress could amend the CTA, or a future administration could narrow the exemptions through additional rulemaking. A company with organized ownership records can respond to a new compliance deadline in days rather than months.
State laws are evolving. As noted above, New York enacted a parallel regime, and although its current scope tracks the narrowed federal rule, the state legislature could broaden it again. Additional states may enact their own requirements. Maintaining current beneficial ownership data ensures you can satisfy state-level filings without starting from scratch.
Bank and lender requests. Under the CDD Rule, financial institutions will still ask for beneficial ownership information when you open accounts or renew credit facilities. Having that data organized makes these interactions faster.
Transactional due diligence. Private equity buyers, merger counterparties, and lenders conducting due diligence will request ownership structures as part of any material transaction. Keeping that information current is a basic element of transaction readiness.
Modus routinely helps mid-market companies build and maintain the internal records that satisfy both current obligations and readiness for future ones. See our accounting and advisory services for context on how that work fits into broader financial governance.
Anti-Money Laundering Context: Why the Policy Debate Continues
Beneficial ownership transparency was not an isolated regulatory experiment. The Financial Action Task Force (FATF) has long identified anonymous shell companies as a primary vehicle for money laundering and sanctions evasion. The CTA was the United States’ primary response to FATF recommendations and to years of Government Accountability Office reports documenting the ease with which bad actors could obscure ownership structures.
The narrowing of the rule has drawn criticism from anti-corruption advocates and some foreign governments who view robust ownership disclosure as essential to a clean financial system. FinCEN’s stated rationale, that the agency will refocus its beneficial ownership work on the CDD Rule and on collecting ownership data through financial institutions rather than a centralized government database, signals that the policy goals remain active even as the reporting mechanism has changed.
Finance leaders at companies with complex ownership structures, international operations, or significant banking relationships should treat beneficial ownership governance as a standing compliance function, not a one-time filing exercise. The specific disclosure mechanism may change, but the underlying expectation of transparency will not.
For companies working through ownership structure questions in the context of an audit, financing, or restructuring, our client accounting services team can help document control and ownership relationships in a format that satisfies multiple purposes at once.
Frequently Asked Questions
Do I still have to file a beneficial ownership information report in 2026?
If your company was formed in the United States, including any LLC, corporation, or partnership created under U.S. federal or state law, you have no federal obligation to file a BOI report with FinCEN as of August 14, 2026. The final rule permanently exempts all domestic entities. If your company was formed under foreign law and registered to do business in a U.S. state, you remain subject to BOI reporting and should confirm that your initial report was filed and that updates are current.
What happened to the BOI data that U.S. companies already filed?
FinCEN committed to deleting beneficial ownership information previously submitted by U.S. persons from its database. If your domestic company filed a BOI report before the domestic exemption took effect, FinCEN is removing that data. You do not need to take any action to request deletion.
Does the FinCEN exemption affect what my bank asks for?
No. Banks and other financial institutions must still collect beneficial ownership information from their legal-entity customers under FinCEN’s Customer Due Diligence Rule, which is a separate regulation from the CTA reporting rule. When you open a new account or renew a credit facility, your bank will still request the names, addresses, and identifying information of your beneficial owners. That process has not changed.
Is the New York LLC Transparency Act the same as the federal BOI rule?
No, it is a separate state law that took effect January 1, 2026, though its scope now closely follows the federal rule. Because the New York statute cross-references the federal Corporate Transparency Act and Governor Hochul vetoed a decoupling amendment in December 2025, the law as effective in 2026 applies only to LLCs formed outside the United States and authorized to do business in New York. U.S.-formed LLCs, including LLCs organized in New York, are exempt from reporting under the current version of the state law.
Could the domestic BOI exemption be reversed?
Yes. The exemption is a product of administrative rulemaking, not an amendment to the CTA statute itself. A future administration could initiate a new rulemaking to reinstate broader reporting requirements. The Eleventh Circuit’s December 2025 ruling confirmed the CTA is constitutional, so Congress and FinCEN retain the legal authority to expand reporting requirements again without returning to court. Companies that keep their beneficial ownership records organized will be in the best position to respond quickly if the rules change.
What are the penalties for foreign reporting companies that fail to file?
Foreign reporting companies that are required to file and fail to do so, or that submit false information, face civil penalties of up to $606 per day for ongoing violations, an inflation-adjusted figure effective January 17, 2025, along with criminal penalties including fines of up to $10,000 and up to 2 years imprisonment. Those penalties apply to foreign reporting companies that miss their filing deadlines, while no penalties apply to exempt domestic entities. The daily civil penalty amount is adjusted periodically for inflation, so confirm the current figure before relying on it.
Filed under: Tax & Regulatory