The Financial Crimes Enforcement Network (FinCEN) has removed the requirement that U.S. companies and U.S. persons must report beneficial ownership information (BOI) to FinCEN under the Corporate Transparency Act.

The Financial Crimes Enforcement Network (FinCEN) has removed the requirement that U.S. companies and U.S. persons must report beneficial ownership information (BOI) to FinCEN under the Corporate Transparency Act. This interim final rule is consistent with the Treasury Department's recent announcement that it was suspending enforcement of the CTA against U.S. citizens, domestic reporting companies, and their beneficial owners, and that it would be narrowing the scope of the BOI reporting rule so that it applies only to foreign reporting companies.

The interim final rule amends the BOI regulations by:

• changing the definition of "reporting company" 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 filing of a document with a secretary of state or similar office (these entities had formerly been called "foreign reporting companies"), and
• exempting entities previously known as "domestic reporting companies" from BOI reporting requirements.

Under the revised rules, all entities created in the United States (including those previously called "domestic reporting companies") and their beneficial owners are exempt from the BOI reporting requirement, including the requirement to update or correct BOI previously reported to FinCEN. Foreign entities that meet the new definition of "reporting company" and do not qualify for a reporting exemption must report their BOI to FinCEN, but are not required to report any U.S. persons as beneficial owners. U.S. persons are not required to report BOI with respect to any such foreign entity for which they are a beneficial owner.

Reducing Regulatory Burden

On January 31, 2025, President Trump issued Executive Order 14192, which announced an administration policy "to significantly reduce the private expenditures required to comply with Federal regulations to secure America’s economic prosperity and national security and the highest possible quality of life for each citizen" and "to alleviate unnecessary regulatory burdens" on the American people.

Consistent with the executive order and with exemptive authority provided in the CTA, the Treasury Secretary (in concurrence with the Attorney General and the Homeland Security Secretary) determined that BOI reporting by domestic reporting companies and their beneficial owners "would not serve the public interest" and "would not be highly useful in national security, intelligence, and law enforcement agency efforts to detect, prevent, or prosecute money laundering, the financing of terrorism, proliferation finance, serious tax fraud, or other crimes."The preamble to the interim final rule notes that the Treasury Secretary has considered existing alternative information sources to mitigate risks. For example, under the U.S. anti-money laundering/countering the financing of terrorism regime, covered financial institutions still have a continuing requirement to collect a legal entity customer's BOI at the time of account opening (see 31 CFR 1010.230). This will serve to mitigate certain illicit finance risks associated with exempting domestic reporting companies from BOI reporting.

BOI reporting by foreign reporting companies is still required, because such companies present heightened national security and illicit finance risks and different concerns about regulatory burdens. Further, the preamble points out that the policy direction to minimize regulatory burdens on the American people can still be achieved by exempting foreign reporting companies from having to report the BOI of any U.S. persons who are beneficial owners of such companies.

Deadlines Extended for Foreign Companies

When the interim final rule is published in the Federal Register, the following reporting deadlines apply:

• Foreign entities that are registered to do business in the United States before the publication date of the interim final rule must file BOI reports no later than 30 days from that date.
• Foreign entities that are registered to do business in the United States on or after the publication date of the interim final rule have 30 calendar days to file an initial BOI report after receiving notice that their registration is effective.

Effective Date; Comments Requested

The interim final rule is effective on the date of its publication in the Federal Register.

FinCEN has requested comments on the interim final rule. In light of those comments, FinCEN intends to issue a final rule later in 2025.

Written comments must be received on or before the date that is 60 days after publication of the interim final rule in the Federal Register.

Interested parties can submit comments electronically via the Federal eRulemaking Portal at http://www.regulations.gov. Alternatively, comments may be mailed to Policy Division, Financial Crimes Enforcement Network, P.O. Box 39, Vienna, VA 22183. For both methods, refer to Docket Number FINCEN-2025-0001, OMB control number 1506-0076 and RIN 1506-AB49.

FinCEN Interim Final Rule RIN 1506-AB49

FinCEN News Release

Melanie Krause, the IRS’s Chief Operating Officer, has been named acting IRS Commissioner following the retirement of Doug O’Donnell. Treasury Secretary Scott Bessent acknowledged O’Donnell’s 38 years of service, commending his leadership and dedication to taxpayers.

Melanie Krause, the IRS’s Chief Operating Officer, has been named acting IRS Commissioner following the retirement of Doug O’Donnell. Treasury Secretary Scott Bessent acknowledged O’Donnell’s 38 years of service, commending his leadership and dedication to taxpayers. O’Donnell, who had been acting Commissioner since January, will retire on Friday, expressing confidence in Krause’s ability to guide the agency through tax season. Krause, who joined the IRS in 2021 as Chief Data & Analytics Officer, has since played a key role in modernizing operations and overseeing core agency functions. With experience in federal oversight and operational strategy, Krause previously worked at the Government Accountability Office and the Department of Veterans Affairs Office of Inspector General. She became Chief Operating Officer in 2024, managing finance, security, and procurement. Holding advanced degrees from the University of Wisconsin-Madison, Krause will lead the IRS until a permanent Commissioner is appointed.

A grant disbursement to a corporation to be used for rent payments following the September 11, 2001 terrorist attacks on the World Trade Center was not excluded from the corporation's gross income. Grants were made to affected businesses with funding provided by the U.S. Department of Housing and Urban Development. The corporation's grant agreement required the corporation to employ a certain number of people in New York City, with a portion of those people employed in lower Manhattan for a period of time. Pursuant to this agreement, the corporation requested a disbursement as reimbursement for rent expenses.

A grant disbursement to a corporation to be used for rent payments following the September 11, 2001 terrorist attacks on the World Trade Center was not excluded from the corporation's gross income. Grants were made to affected businesses with funding provided by the U.S. Department of Housing and Urban Development. The corporation's grant agreement required the corporation to employ a certain number of people in New York City, with a portion of those people employed in lower Manhattan for a period of time. Pursuant to this agreement, the corporation requested a disbursement as reimbursement for rent expenses.

Exclusions from Gross Income

Under the expansive definition of gross income, the grant proceeds were income unless specifically excluded. Payments are only excluded under Code Sec. 118(a) when a transferor intends to make a contribution to the permanent working capital of a corporation. The grant amount was not connected to capital improvements nor restricted for use in the acquisition of capital assets. The transferor intended to reimburse the corporation for rent expenses and not to make a capital contribution. As a result, the grant was intended to supplement income and defray current operating costs, and not to build up the corporation's working capital.

The grant proceeds were also not a gift under Code Sec. 102(a). The motive for providing the grant was not detached and disinterested generosity, but rather a long-term commitment from the company to create and maintain jobs. In addition, a review of the funding legislation and associated legislative history did not show that Congress possessed the requisite donative intent to consider the grant a gift. The program was intended to support the redevelopment of the area after the terrorist attacks. Finally, the grant was not excluded as a qualified disaster relief payment under Code Sec. 139(a) because that provision is only applicable to individuals.

Accuracy-Related Penalty

Because the corporation relied on Supreme Court decisions, statutory language, and regulations, there was substantial authority for its position that the grant proceeds were excluded from income. As a result, the accuracy-related penalty was not imposed.

CF Headquarters Corporation, 164 TC No. 5, Dec. 62,627

The parent corporation of two tiers of controlled foreign corporations (CFCs) with a domestic partnership interposed between the two tiers was not entitled to deemed paid foreign tax credits under Code Sec. 902 or Code Sec. 960 for taxes paid or accrued by the lower-tier CFCs owned by the domestic partnership. Code Sec. 902 did not apply because there was no dividend distribution. Code Sec. 960 did not apply because the Code Sec. 951(a) inclusions with respect to the lower-tier CFCs were not taken into account by the domestic corporation.

The parent corporation of two tiers of controlled foreign corporations (CFCs) with a domestic partnership interposed between the two tiers was not entitled to deemed paid foreign tax credits under Code Sec. 902 or Code Sec. 960 for taxes paid or accrued by the lower-tier CFCs owned by the domestic partnership. Code Sec. 902 did not apply because there was no dividend distribution. Code Sec. 960 did not apply because the Code Sec. 951(a) inclusions with respect to the lower-tier CFCs were not taken into account by the domestic corporation.

Background

The parent corporation owned three CFCs, which were upper-tier CFC partners in a domestic partnership. The domestic partnership was the sole U.S. shareholder of several lower-tier CFCs.

The parent corporation claimed that it was entitled to deemed paid foreign tax credits on taxes paid by the lower-tier CFCs on earnings and profits, which generated Code Sec. 951 inclusions for subpart F income and Code Sec. 956 amounts. The amounts increased the earnings and profits of the upper-tier CFC partners.

Deemed Paid Foreign Tax Credits Did Not Apply

Before 2018, Code Sec. 902 allowed deemed paid foreign tax credit for domestic corporations that owned 10 percent or more of the voting stock of a foreign corporation from which it received dividends, and for taxes paid by another group member, provided certain requirements were met.

The IRS argued that no dividends were paid and so the foreign income taxes paid by the lower-tier CFCs could not be deemed paid by the entities in the higher tiers.

The taxpayer agreed that Code Sec. 902 alone would not provide a credit, but argued that through Code Sec. 960, Code Sec. 951 inclusions carried deemed dividends up through a chain of ownership. Under Code Sec. 960(a), if a domestic corporation has a Code Sec. 951(a) inclusion with respect to the earnings and profits of a member of its qualified group, Code Sec. 902 applied as if the amount were included as a dividend paid by the foreign corporation.

In this case, the domestic corporation had no Code Sec. 951 inclusions with respect to the amounts generated by the lower-tier CFCs. Rather, the domestic partnerships had the inclusions. The upper- tier CFC partners, which were foreign corporations, included their share of the inclusions in gross income. Therefore, the hopscotch provision in which a domestic corporation with a Code Sec. 951 inclusion attributable to earnings and profits of an indirectly held CFC may claim deemed paid foreign tax credits based on a hypothetical dividend from the indirectly held CFC to the domestic corporation did not apply.

Eaton Corporation and Subsidiaries, 164 TC No. 4, Dec. 62,622

Other Reference:

• Code Sec. 960

An appeals court affirmed that payments made by an individual taxpayer to his ex-wife did not meet the statutory criteria for deductible alimony. The taxpayer claimed said payments were deductible alimony on his federal tax returns.

An appeals court affirmed that payments made by an individual taxpayer to his ex-wife did not meet the statutory criteria for deductible alimony. The taxpayer claimed said payments were deductible alimony on his federal tax returns.

The taxpayer’s payments were not deductible alimony because the governing divorce instruments contained multiple clear, explicit and express directions to that effect. The former couple’s settlement agreement stated an equitable division of marital property that was non-taxable to either party. The agreement had a separate clause obligating the taxpayer to pay a taxable sum as periodic alimony each month. The term “divorce or separation instrument” included both divorce and the written instruments incident to such decree.

Unpublished opinion affirming, per curiam, the Tax Court, Dec. 62,420(M), T.C. Memo. 2024-18.

J.A. Martino, CA-11

Eleventh-hour votes in Congress in December renewed a package of tax extenders for 2014, created new savings accounts for individuals with disabilities, cut the IRS’ budget, and more. At the same time, the votes helped to set the stage for the 114th Congress that convenes this month. Republicans have majorities in the House and Senate and have indicated that taxes are one of the top items on their agenda for 2015.

Eleventh-hour votes in Congress in December renewed a package of tax extenders for 2014, created new savings accounts for individuals with disabilities, cut the IRS’ budget, and more. At the same time, the votes helped to set the stage for the 114th Congress that convenes this month. Republicans have majorities in the House and Senate and have indicated that taxes are one of the top items on their agenda for 2015.

Extenders

The Tax Increase Prevention Act of 2014, signed into law by President Obama in December extends more than 50 individual, business and energy tax incentives retroactively to January 1, 2014. As a result, taxpayers can claim these incentives on their 2014 returns filed in 2015. The Act includes all of the popular incentives for individuals, such as the state and local sales tax deduction and higher education tuition deduction, as well as many business incentives, including the research tax credit, bonus depreciation and enhanced Code Sec. 179 expensing. A handful of extenders were not renewed, mostly targeted to energy efficiency. If you have any questions about the renewal of the extenders for 2014, please contact our office.

ABLE Act

As part of the extenders package, Congress approved the Achieving a Better Life Experience (ABLE) Act of 2014. The Act establishes ABLE accounts for individuals with disabilities. Funds in ABLE accounts may be used for qualified expenses of persons with disabilities. To fund these accounts, the Act:

• Adjusts for inflation some civil tax penalties
• Authorizes the IRS to certify qualifying professional employer organizations
• Excludes dividends from controlled foreign corporations from the definition of personal holding company income
• Increases the IRS’ levy authority on payments to Medicare providers
• Raises the Inland Waterways Trust Fund financing rate

IRS budget

The IRS goes into the 2015 filing season with a reduced budget. The omnibus spending agreement, signed into law by President Obama on December 16, cuts the IRS’ fiscal year (FY) 2015 budget by some $345 million. The omnibus spending agreement also instructs the IRS to improve its response times in helping victims of identity theft and reduce refund fraud. In response to the budget cuts, IRS Commissioner John Koskinen said the agency will freeze hiring and take other steps to reduce expenses. Koskinen also cautioned that revenue collection and tax enforcement could be impaired by the budget cuts as the agency will have to make do with less. Taxpayer audits were singled out by Koskinen as one area where cutbacks could have a negative effect.

Affordable Care Act

Congress also clarified the status of so-called expatriate health plans under the Affordable Care Act. These plans cover very specific groups of people, including participants in a group health plan who are aliens residing outside the United States and U.S. nationals about whom there is a good faith expectation of being abroad, in connection with his or her employment, for at least 180 days in a 12-month period.

The omnibus spending agreement exempts expatriate health plans, employer sponsors of these plans, and insurance issuers providing coverage under these plans from the health care coverage requirements of the Affordable Care Act. Additionally, the omnibus spending agreement treats these plans as providing minimum essential coverage for purposes of the Affordable Care Act’s individual mandate.

Multi-employer pension plans

The extenders package and the omnibus spending agreement amend the rules governing multi-employer pension plans. The provisions, supporters argued, are intended to shore-up many struggling plans. Opponents countered that the changes weaken protections for beneficiaries. The amendments to the multi-employer pension rules are very technical. Please contact our office for more details

114th Congress

The Tax Increase Prevention Act did not extend the extenders beyond 2014. As of January 1, 2015, they all expired again. During 2014, proposals to extend the incentives for two years or make them permanent were floated in Congress. The GOP-controlled House vote to make permanent bonus depreciation, enhanced Code Sec. 179 expensing and some charitable giving breaks, but these bills were not taken up by the Democratic-controlled Senate. This could change in the 114th Congress. The new leaders of the tax-writing committees, Rep. Paul Ryan, R-Wisc., chair of the House Ways and Means Committee, and Sen. Orrin Hatch, R-Utah, chair of the Senate Finance Committee, have both indicated their interest in addressing the extenders as part of comprehensive tax reform.

Any movement toward comprehensive tax reform will require cooperation between the White House and the Republican-controlled Congress. In December, President Obama said that he would be willing to work with Republicans on corporate tax reform but any decrease in the corporate tax rate would need to be paid for by revenue raisers elsewhere. The President also said that he wants to preserve and make permanent some temporary enhancements to individual tax breaks, such as the earned income credit. New Senate Majority Leader Mitch McConnell, R-Ky., also said in December that he could work with the White House.

Please contact our office if you have any questions about the 2014 year-end legislation or the new Congress.

2014 was a notable year for tax developments on a number of fronts. Selecting the "top ten" tax developments for 2014 necessarily requires judgment calls based upon uniqueness, taxpayers affected, and forward-looking impact on 2015 and beyond. The following "top ten" list of 2014 tax developments is such a prioritization. Nevertheless, other 2014 developments may prove more significant to any particular client, depending upon circumstances. Please feel free to contact this office for a more customized look at the impact of 2014 developments upon your unique tax situation.

2014 was a notable year for tax developments on a number of fronts. Selecting the "top ten" tax developments for 2014 necessarily requires judgment calls based upon uniqueness, taxpayers affected, and forward-looking impact on 2015 and beyond. The following "top ten" list of 2014 tax developments is such a prioritization. Nevertheless, other 2014 developments may prove more significant to any particular client, depending upon circumstances. Please feel free to contact this office for a more customized look at the impact of 2014 developments upon your unique tax situation.

Passage of the Extenders Package

2014 was not a year for major tax legislation in Congress. In fact, Congress even failed to pass its usual two-year Extenders package, instead settling on a one-year retroactive extension to January 1, 2014. As one Senator put it, "This tax bill doesn't have the shelf life of a carton of eggs," referring to the fact that the 50-plus extenders provisions, signed by the President on December 19, 2014, expired again on January 1, 2015. Instead, it has been left to the 114^th Congress to debate the extension of these tax breaks in 2015 and beyond, and for taxpayers to guess what expenses in 2015 will again be entitled to a tax break. 

Affordable Care Act

In many ways, 2014 was a transition year for the Affordable Care Act. One of the most far-reaching requirements, the individual shared responsibility provision, took effect on January 1, 2014. Another key provision, the employer shared responsibility, was delayed (in 2013) to 2015. However, employer reporting under Code Sec. 6605 was not delayed. The IRS also issued guidance on the Code Sec. 36B premium assistance tax credit and other provisions of the Affordable Care Act. Meanwhile, the Supreme Court announced it would review a decision by the Fourth Circuit Court of Appeals upholding IRS regulations on the Code Sec. 36B premium assistance tax credit, a critical component to making the Affordable Care Act viable nationwide.

International Compliance

The IRS and Treasury increased their focus on requirements that U.S. taxpayers report foreign income and assets. The government took the final steps to implement the requirements for U.S. taxpayers and foreign financial institutions to report foreign assets under the Foreign Account Tax Compliance Act (FATCA). The government also tweaked its programs to induce U.S. taxpayers to report undisclosed income and assets from prior past years. At the same time, the IRS and the Department of Justice went to court to seek civil and criminal penalties, including jail time, against willful tax evaders.

Repair Regulations

In 2014, the IRS finished issuing the necessary guidance on the treatment of costs for tangible property under the sweeping so-called “repair” regulations, which impact most businesses. The most important development was the issuance of final regulations on the treatment of dispositions of tangible property under MACRS and under Code Sec. 168, including the identification of assets, the treatment of dispositions, and the computation of gain and loss, particularly in the context of general asset accounts (TD 9689). The IRS also issued several revenue procedures that granted automatic consent for taxpayers to change to the accounting methods allowed by the final regulations (including Rev. Proc. 2014-16 & 54).

IRS Operations

IRS Commissioner John Koskinen predicted a complex and challenging filing season due to cuts in the Service’s funding. Koskinen highlighted the Service’s having to do more with less because of reduced funding. In addition, the IRS is funded at $10.9 billion for FY 2015, which is $1.5 billion below the amount requested by the White House. The FY 2015 budget reduction "undercuts our ability to enforce the Tax Code," Koskinen said. "We will do everything we can to protect the integrity of the filing season." More budget cuts could cause "the wheels to start to fall off," he noted.

Net Investment Income (NII) Tax

Many higher-income individuals were surprised to learn the full impact of the net investment income (NII) tax on their overall tax liability only during the 2014 filing season when their 2013 returns were filed. Starting in 2013, taxpayers with qualifying income have been liable for the 3.8 percent net investment income (NII) tax. The threshold amounts for the NII tax are: $250,000 in the case of joint returns or a surviving spouse, $125,000 in the case of a married taxpayer filing a separate return, and $200,000 in any other case. Recent run ups in the financial markets, and the fact that the NII thresholds are not adjusted for inflation, have increased the need to implement strategies that can avoid or minimize the NII tax. Issues persist that reduce certainty surrounding NII tax liability, in particular determining how a taxpayer "materially participates" in an activity to the extent it is exempt from the NII tax.

Retirement Planning

A number of changes have been made during 2014 affecting IRAs and other qualified plans which, cumulatively, rise to the level of a “top tax development” for 2014:

• Notice 2014-54 now permits a distribution from a 401(k), 403(b) or 457(b) account to have the taxable and non-taxable portions of the distribution directed to separate accounts.  
• TD 9673 now permits IRA holders and defined contribution plan participants to obtain a “longevity” annuity to help insure that they will not outlive their required minimum distributions (RMDs).
• Notice 2014-66 now permits 401(k) plans to offer deferred annuities through target date funds (TDFs).
• Bobrow, TC Memo. 2014-21, held that, in contrast to the IRS guidance in Publication 590, a taxpayer is limited to one 60-day rollover per year for all IRA accounts under the tax code rather than one 60-day rollover per year for each IRA account. The IRS in Announcement 2014-32 stated that the new interpretation of the rollover rules would be applied to rollover distributions received on or after January 1, 2015.
• Clark v. Rameker, a 2014 Supreme Court decision, found that inherited IRA accounts were not retirement assets and therefore not subject to creditor protection under the Bankruptcy Code.

Identity Theft

Although clearly not confined to the area of federal tax, identity theft has been a major issue for both the IRS and taxpayers. In 2014, the IRS put new filters in place and took other measures to curb tax-related identity theft. The agency also worked with software developers, financial institutions and the prepaid debit card industry to combat identity theft. "We rejected 5.7 million suspicious returns last year that may have been tied to identity theft," IRS Commissioner Koskinen said. Nevertheless, few believe that the IRS has yet turned the tide.

Same-sex Marriage

After the Supreme Court struck down Section 3 of the Defense of Marriage Act in Windsor, the IRS issued guidance in 2013 adopting a place of celebration approach to recognizing same-sex marriage. The IRS followed-up with additional guidance in 2014 that required employers to take note of Windsor with regard to workplace tax benefits. Notably, the IRS focused on what changes needed to be made to retirement plan benefits in light of Windsor.

Tax Reform

Although 2014 was clearly not the year for tax reform (despite some 2013 forecasts that it would be), the foundations for serious tax reform discussions were laid in 2013 and 2014, when Congressional hearings and studies took place. Looking ahead to 2015 and beyond, there is optimism that Congress will complete some form of tax reform in 2015 or 2016.

The major difference of opinion, however, surrounds whether or not the reform would only address corporate tax provisions or also include individual provisions. Corporate reform has been pushed into the spotlight lately both by the controversy surrounding corporate inversions in changing foreign headquarters and by the general concern that American international business competitiveness is lessened by high U.S. corporate tax rates. House Ways and Means Committee Chairman Dave Camp, R-Mich., on the other hand has called for tackling comprehensive tax reform on both the business and individual side. His Tax Reform Bill of 2014 (HR 1) would make the Code "more effective and efficient," according to Camp, by getting rid of narrowly targeted provisions to lower tax rates across the board. "This will enable small and large businesses alike to expand operations, hire new workers, and increase benefits and take-home pay," he said.