On March 21, 2025 FinCEN (the agency within the Treasury Department charged with implementing the CTA) adopted an interim final rule (the “IFR”) exempting from the scope of the previously announced reporting rules under the CTA all entities previously defined as “domestic reporting companies” – i.e., all entities formed by filing a document with the Secretary of State or similar office of a U.S. state or tribe. That leaves the reporting requirements only applicable to “foreign reporting companies,” which are companies formed under the laws of a foreign country and qualified to do business in a U.S. state or tribal jurisdiction by means of a filing with the Secretary of State or similar office of the jurisdiction, as “foreign reporting companies” do not include U.S. companies with foreign ownership or control, and as most foreign companies do not choose to themselves qualify to do business in the U.S. but rather do so through U.S. subsidiaries, there are very few “foreign reporting companies.” This dramatically shrinks the number of companies subject to the CTA’s reporting requirements to less than 1% of the originally expected number, and with it the CTA’s relevance for opinion practice.
Our 2023 article observed that there were very few aspects of opinions routinely given in corporate transactions that could implicate provisions of the CTA, and that in view of the previous exemptions covering most of the larger entities involved in transactions where opinions are likely to be given the CTA had limited significance for opinion givers. We noted then that in light of these facts, there would likely be little resistance to including the CTA among the laws not addressed in a typical closing opinion.
By greatly shrinking the universe of reporting companies, the IFR makes it more likely that the CTA will not have any practical relevance to opinion practice unless a company on which an opinion is given is one of the very few “foreign reporting companies” subject to the reporting requirements. While one cannot predict the future, it would seem more likely following adoption of the IFR that opinion givers will routinely exclude the CTA from opinions without objection. In the rare case where a recipient has a reason to have the CTA addressed, the parties can discuss whether or not that can and should be done in the circumstances.
The IFR is an interim rule. As such, while it is immediately effective, it is subject to comment and revision. Some lawyers have questioned whether or not the IFR will survive judicial review. Diving into the merits of what will happen, if anything, to the IFR is beyond the scope of this note. While a lawyer giving an opinion that did not exclude the CTA should be entitled to rely on the IFR while it is in effect, excluding the CTA entirely from an opinion avoids any issue.
