Read the U.S. Treasury Department’s Press Release
Two weeks after FinCEN received the green light from the courts to proceed with enforcement of the Corporate Transparency Act, the U.S. Treasury Department has put the car in reverse.
On March 2nd, the Treasury Department announced that it will issue proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only and not enforce BOI (Beneficial Ownership Information) reporting on U.S. citizens and domestic reporting companies.
“This is a victory for common sense,” said U.S. Secretary of the Treasury Scott Bessent. “Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy.”
Following this announcement from the Treasury Department, we expect a follow-up statement from FinCEN and additional rules to be promulgated. However, as the language of the press release indicates, the regulatory burden will be lifted shortly on more than 30 million U.S. businesses.
The Treasury Department’s press release comes days after FinCEN announced on February 27th that it would not enforce any fines associated with BOI reporting under the existing regulatory deadlines.
How We Got Here: Treasury Department Looks to End CTA’s Revolving Door
The CTA was signed into federal law in 2021 as part of the National Defense Authorization Act that requires individuals with an ownership interest in a LLC to disclose personal data with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
The CTA was enacted by Congress as an expansion of the anti-money laundering laws, intended to prevent terrorist financing, corruption, tax fraud, and other illicit activity. FinCEN originally announced that failure to comply would result in up to two (2) years of jail time and a $10,000 fine per violation.
The CTA went into effect on Jan. 1, 2024, but courts have gone back and forth on the constitutionality of the act. Here are several court decisions that took place in 2024:
- On March 1, 2024, the Northern District of Alabama Northeastern Division, in National Small Business United v. Yellen, 5:22-cv-1448 (N.D. Ala.), ruled the CTA unconstitutional. However, the holding only applied to the plaintiffs in the Alabama federal case.
- On Dec. 3, 2024, Judge Amos L. Mazzant III, of the U.S. District Court for the Eastern District of Texas, granted a nationwide preliminary injunction to temporarily block the enforcement of the CTA, ruling the act unconstitutional. The opinion was published in Texas Top Cop Shop, Inc. v. Garland (E.D. Tex., No. 4:24-cv-00478).
- On December 23, 2024, the Fifth Circuit overturned the Texas District Court’s nationwide injunction regarding the Corporate Transparency Act (“CTA”), requiring companies to report.
- On Dec. 26, 2024, a S. Court of Appeals for the Fifth Circuit panel issued an order to vacate the order on Dec. 23 made by a different panel in the same court.
- On Jan. 23, 2025, the S. Supreme Court (“SCOTUS”) lifted the nationwide injunction against enforcement of the CTA that was issued by the U.S. District Court of the Eastern District of Texas in Texas Top Cop Shop v. McHenry(formerly Texas Top Cop Shop v. Garland). The justices sided with the federal government to lift the nationwide injunction pertaining to the CTA.
- On Feb. 17, 2025, following SCOTUS’ decision to lift the nationwide injunction against enforcement of the CTA in Texas Top Cop Shop, the second temporary restraining order in the Eastern District of Texas blocking CTA enforcement was stayed, pending appeal. The order was issued on Feb. 17 in Smith v. U.S. Department of the Treasury.
The Smith case was the only other nationwide injunction in place according to the court system, which would have allowed FinCEN to proceed with CTA enforcement.
However, the March 2nd press release reverses course with language saying that the CTA will apply to foreign companies only. We will monitor the action by the Treasury Department and FinCEN when they release that information.
