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The controversial Corporate Transparency Act is a goner — sort of.
The U.S. Treasury Department announced this week that it won’t fine or penalize anyone for not following the current rules requiring companies to report their owners under the Corporate Transparency Act.
That includes the rules already in place and any new rules that are coming soon.
The Treasury also said it plans to change the rules so that only foreign companies will have to report this kind of ownership information — not U.S. citizens or American businesses.
They say they’re doing this to help American taxpayers and small businesses, and to make sure the rule actually serves the public’s best interests.
“This is a victory for common sense,” said U.S. Secretary of the Treasury Scott Bessent in a statement. “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.”
In December, the U.S. District Court for the Eastern District of Texas issued a preliminary nationwide injunction prohibiting the enforcement of the Corporate Transparency Act.
In Texas Top Cop Shop, Inc., et al. v. Garland, et al. the court ruled that Congress overstepped its legislative authority in enacting the CTA, describing it as “quasi-Orwellian.” The decision emphasized that supporting the CTA’s mandate for most entities created or registered under state law to continuously disclose information to the federal government “would be to rubber-stamp a new form of federal power” that could “threaten the very fabric of our system of federalism.”
Judge Amos Mazzant, appointed by President Barack Obama, wrote the majority opinion. Mazzant received his law degree at Baylor.
The U.S. Supreme Court in January, without explanation, granted the Biden administration’s request to overturn the lower court’s decision, arguing that Congress was within its Commerce Clause authority to regulate economic activities impacting interstate commerce.
The Corporate Transparency Act was enacted by Congress on Jan. 1, 2021, as part of the National Defense Authorization Act. The CTA was designed to combat money laundering, tax fraud, and terrorist financing.
The plaintiffs, including small business owners and a trade association, argued that the CTA compels speech and association, infringing on First Amendment protections. They also raised concerns about privacy violations under the Fourth Amendment.
The CTA would mandate that companies disclose and regularly update detailed beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). It subjected covered entities and their “beneficial owners” to vague and complex reporting requirements while putting their sensitive personal information at risk.
Failure to comply, according to the law, can result in fines of over $590 per day, as well as felony charges and up to two years imprisonment.
FinCEN estimated that more than 32 million entities would have been affected by the new law in 2025, with an additional 6 million each subsequent year as new businesses are formed.