Peter Hanna
Associate Editor
Loyola University Chicago School of Law, JD 2026
Among some of the big changes being made by the new Administration is the intention to no longer enforce the Corporate Transparency Act (CTA) against U.S. citizens and domestic reporting companies. The CTA, enacted back in 2021, was designed and implemented to enhance corporate accountability and combat financial crimes like money laundering, fraud, tax evasion, and the like. It requires certain businesses to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN) with the goal of increasing transparency in corporate structures and organizations. However, some recent developments have led to significant changes in the ability to enforce this act, sparking a lot of debate on the implications of (or without) the act.
Under the CTA, specific U.S. businesses, typically smaller corporations, and limited liability companies (LLCs) are mandated to report their beneficial owners to FinCEN. A beneficial owner is defined as an individual that either directly or indirectly exercises and maintains substantial control over a company, or owns at least 25% of the company’s ownership interests. The information necessary to report merely requires the individual’s full legal name, date of birth, current residential or business address, and a unique identification number from an acceptable document, like a passport or driver’s license. This information is intended to assist law enforcement agencies in preventing the above-mentioned illicit activities through anonymous shell companies—a business entity that often only exists on paper that lacks active business operations or assets, and can be used to conduct the above-mentioned illicit activities and crimes.
Recent changes and preliminary suspension of enforcement
In March of 2025, the U.S. Department of Treasury announced a suspension of enforcement against U.S. citizens and domestic reporting companies. This means that these entities are no longer required to report and submit their beneficial ownership information to FinCEN and there will be no penalties or fines imposed for non-compliance with the CTA. Original challenges to the CTA came through influence from a federal court decision that raised questions about the constitutionality of the CTA. A federal district court in Texas ruled that the CTA is likely unconstitutional and preliminarily enjoined its enforcement nationwide. The court held that the CTA is not a proper exercise of Commerce Clause power because it does not regulate a channel or instrumentality of interstate commerce or any activity that substantially affects commerce. The court also found that the CTA cannot be justified under the Necessary and Proper Clause because it is not rationally related to any enumerate power to regulate commerce, conduct foreign affairs, or collect taxes.
This court’s reasoning has been highly debated, and it is unclear whether or not this decision was a main factor in the Treasury Department’s ultimate decision to suspend enforcement of the CTA all-together. Nevertheless, on March 2nd, 2025, the Treasury Department issued a statement that they will not enforce any fines or penalties associated with the beneficial ownership information reporting rule against domestic citizens and entities. “Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reigning in burdensome regulations, in particular for small businesses that are the backbone of the American economy,” said U.S. Secretary of Treasury Scott Bessent. There is a good amount of ongoing litigation regarding the issue, and many feel that suspension of the CTA will lead to a noticeable rise in financial crimes through shell companies.
Arguments for and against enforcement
Proponents of the CTA insist that requiring beneficial ownership information helps authorities identify and prevent illicit activities conducted through anonymous entities, helping to combat financial crimes. Without enforcement of the CTA, it will be much easier to commit illicit corporate activities in the United States. Further, proponents say increased corporate transparency deters the misuse of corporate structures for illegal purposes while also promoting a level playing field for businesses. Further, enforcing the CTA demonstrates the U.S’s commitment to global efforts in combating money laundering and terrorist financing by aligning with standards set by organizations like the Financial Action Task Force (FATF)—an intergovernmental body established to combat money laundering and terrorist financing around the world. Supporters contend that these benefits heavily outweigh any concerns with the compliance costs imposed on businesses and are crucial for maintaining the integrity of the financial system.
On the other hand, opponents of the CTA’s enforcement raise many concerns, including privacy issues. They contend that mandating the disclosure of personal information of beneficial owners raises concerns with regard to data security and potential misuse of sensitive information. It is also argued that the act places an unnecessary regulatory burden on small businesses, as it could impose significant administrative and financial burdens on smaller companies, diverting resources they need for their core operations. Further, critics argue that the CTA represents an overextension of federal authority into areas that are meant to be regulated state-by-state, possibly infringing on the state’s rights to govern corporate entities in their jurisdiction. Arguments on either side revolve around the tension between the goals of enhancing transparency and protecting the rights of individuals and businesses.
Near future possibilities
In the coming weeks, expect to see many appeals and higher court rulings regarding the issue. If it reaches the Supreme Court, a final ruling may end up taking longer but would set a national precedent that can be followed nationwide, or it could relinquish the decision to the states to decide themselves. FinCEN may also issue some clarifications on the enforcement and possibly narrow the CTA’s focus solely to foreign entities while exempting U.S. businesses. Congress could also amend the CTA to clarify scope and avoid endless litigation on the issue. The bottom line is that over the next few months, it is fair to expect continued legal battles, policy shifts, and uncertain compliance requirements for domestic companies. If FinCEN does not appeal, domestic business might permanently avoid reporting obligations. However, if the case moves forward, a revised version of the CTA could emerge in the near future.