New York Governor Vetoes Amendment to NY LLC Transparency Act: U.S. Persons No Longer Obligated to File

New York Governor Kathy Hochul has vetoed Senate Bill 8432, leaving the NY LLC Transparency Act in its current state.  As a consequence, when the law takes effect January 1, 2026, it will apply only to entities organized outside of the United States.  The Governor’s veto effectively moots the new law for U.S. residents and their companies organized in the U.S. that do business in the State of New York.

Background

In 2023, fearing that the federal Corporate Transparency Act might not afford state law enforcement adequate access to beneficial ownership information, the New York Legislature passed its own version of a beneficial ownership disclosure law.  As amended, the New York Limited Liability Company Transparency Act (“NY LLCTA”) would have required limited liability companies formed in New York, or registered to do business in New York, to file a disclosure of their beneficial ownership.  The NY LLCTA, however, suffered from a fatal flaw: Most of the key terms cross-referenced definitions found in the federal Corporate Transparency Act (the “CTA”) and the federal regulations that implemented the CTA.

The CTA (codified at 31 U.S.C. 5336) was adopted by Congress in late 2020 as part of the annual omnibus defense appropriations bill.  The Financial Crimes Enforcement Network of the U.S. Treasury (“FinCEN”) adopted regulations at 31 CFR 1010.380.  As originally implemented, the CTA would have required more than 30 million corporations, LLCs and other legal entities to file a beneficial ownership information report (or “BOI Report”) with FinCEN.  Each BOI Report was required to identify the “beneficial owners” of the reporting company, and entities formed on or after the implementation date also needed to identify the reporting company’s company applicant (defined as the individual who filed the documentation that formed the reporting company).

The federal CTA and its implementing regulations prompted significant pushback from the business community.  Several plaintiffs filed suit under various constitutional theories, winning preliminary injunctions that stayed the implementation of the law.  Other business groups lobbied the second Trump administration for relief, arguing that the CTA’s burden on small businesses would be too great.  Ultimately, this lobbying effort resulted in an Interim Final Rule that took effect March 26, 2025 that left the CTA regulations in place but exempted reporting companies from filing any identifying information with respect to any “United States person.”  As a consequence, what would have been a filing obligation for more than 30 million companies was reduced to a filing obligation estimated to apply to fewer than 100,000 companies formed outside the U.S. but registered to do business in the U.S.

The New York LLC Transparency Act

The NY LLCTA was adopted in 2024 and incorporated by reference key concepts and definitions from the federal CTA. After giving effect to the Interim Final Rule that eliminated any CTA filing obligations for U.S. persons, the NY LLCTA would only have applied to entities formed outside the U.S.  Limited liabilities companies formed in New York (and those formed elsewhere in the U.S. that registered to do business in New York) would not be obligated to file a disclosure report under the NY LLCTA.

In 2025, through Senate Bill 8432, the New York legislature tried to amend the NY LLCTA to avoid the cross-references to the federal law that exempted domestic entities.

Senate Bill 8432 had several drafting errors, however, that would have left the New York statute seriously impaired if the bill had become law. For example, even after the amendment, the NY LLCTA would still have contained no definition for key terms like “Applicant,” “Substantial Control,” or “Ownership Interest.”  

The Governor’s veto means that the NY LLCTA, when implemented on January 1, 2026, will apply only to limited liability companies organized outside the United States that register to do business in the State of New York.  Entities that will be subject to a filing obligation can avoid it by creating a wholly-owned subsidiary LLC formed under U.S. law.

The Future of Corporate Transparency

For now, owners and managers of LLCs formed in the U.S. have no obligation to file under the NY LLCTA.  That status will only change if the U.S. modifies its laws governing corporate anonymity.

The Interim Final Rule and the sidelined NY LLCTA leave open a hole in the U.S.’s compliance framework for international anti-money laundering.  Before the adoption of the CTA, the U.S. was widely criticized for its non-compliance with recommendations made by the Financial Action Task Force (FATF).  The U.S. initially formed the FATF to harmonize anti-money laundering rules among industrialized economies.  The EU and most industrialized nations have adopted beneficial disclosure rules that follow FATF guidelines to eliminate anonymous corporate ownership.  It was FATF criticism of corporate anonymity in the U.S. that prompted Congress to adopt the CTA in 2020.

Now that the CTA has been sidelined through regulatory fiat, FATF criticism of U.S. corporate anonymity is likely to resume.

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