FinCEN Removes Beneficial Ownership Reporting Requirements for U.S. Companies and U.S. Persons, Sets New Deadlines for Foreign Companies

Immediate Release
March 21, 2025
WASHINGTON––
Consistent with the U.S. Department of the Treasury’s March 2, 2025 announcement, the Financial Crimes Enforcement Network (FinCEN) is issuing an interim final rule that removes the requirement for U.S. companies and U.S. persons to report beneficial ownership information (BOI) to FinCEN under the Corporate Transparency Act. 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. Thus, through this 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 apply for foreign entities that are reporting companies: • Reporting companies registered to do business in the United States before the date of publication of the IFR must file BOI reports no later than 30 days from that date.

• Reporting companies registered to do business in the United States 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 is accepting comments on this interim final rule and intends to finalize the rule this year.

Legal Alert - NJ Tax Break for Small Businesses

On March 20, 2025, New Jersey lawmakers advanced a measure that would bring the New Jersey Gross Income Tax into closer conformity with federal law regarding the income tax treatment of “qualified small business stock,” or “QSBS.” Specifically, Bill No. 4455, which passed unanimously out of the Assembly State and Local Government Committee, would allow payors of the Gross Income Tax to claim a deduction for the capital gains realized from the sale or exchange of QSBS if certain requirements are met. The proposal parallels Section 1202 of the Internal Revenue Code, which allows taxpayers to exclude from income up to $10,000,000 (or 10 times their adjusted basis in the stock) of gain from the sale of QSBS.

The New Jersey proposal adopts several aspects of the federal requirements, such as that the stock must be held by the seller for more than 5 years, must have been acquired in an “original issuance” from a C corporation, and must be engaged in the active conduct of a “qualified small business” (i.e., a business that meets a gross assets test and is not engaged in certain prohibited trades or businesses). However, unlike Section 1202 of the Internal Revenue Code, the New Jersey proposal is a deduction, not an outright exclusion from income. This means that a taxpayer with gain from the sale of QSBS will still take the amount into income for New Jersey purposes, which may limit the taxpayer’s ability to claim other state tax benefits.

In addition, a taxpayer’s ability to claim the deduction in full depends on the qualified small business’s total New Jersey payroll:

1.  if the percentage of the business’s payroll attributable to in-state employees is at least 80 percent, the maximum allowable deduction is the greater of $10 million or 10 times the aggregate adjusted basis of the stock, and

2.  if the percentage of the business’s payroll attributable to in-state employees is less than 80 percent, the maximum allowable deduction would be the greater of $8 million or 8 times the aggregate adjusted basis of the stock.

We are monitoring this development, which will be significant for owners of New Jersey businesses that meet the new qualified small business requirements. If the bill becomes law, it may be possible for existing businesses to do an internal restructuring to position themselves to take advantage of a QSBS deduction in an exit transaction.