U.S. businesses no longer have to comply with the beneficial ownership information (BOI) reporting filing requirements of the Corporate Transparency Act (CTA). The dramatic policy change was first announced on social medial by the Treasury Department, followed by a press release posted on its website and a Truth Social post by President Donald Trump celebrating the end of enforcement of what he branded an “outrageous and invasive” requirement.
The CTA, which was passed on a bipartisan basis, was aimed at limiting the use of anonymous shell companies in drug trafficking, money laundering and other crimes. The beneficial ownership information for each corporation would have been available to law enforcement, but would not have been made public.
Senate Finance Committee Ranking Member Ron Wyden (D-Ore.) immediately denounced the action in a statement issued March 3, 2025. “The takeaway here is that Trump is a rich financial criminal, and he’s running his administration for the benefit of other rich financial criminals. In particular, this is another gift to shadowy Russian oligarchs and money launderers, who have a lot of reasons to celebrate these days thanks to Donald Trump.”
In a March 3 posting on its website, the Treasury Department stated that not only will it not enforce any penalties or fines associated with the BOI reporting rule under the existing regulatory deadlines (in other words under the rules promulgated by the Biden Administration), but that it will not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners “after the forthcoming rule changes take effect either.”
According to the Treasury, the new rules it will be proposing will narrow the scope of required reporting to foreign companies only, though it’s not completely clear whether, in this context, it will apply to foreign companies registered in the U.S. or also to U.S. companies owned by foreign persons and entities.
Before the announcement, reporting requirements applied to businesses created in the U.S. and foreign companies registered to do business in any U.S. state or Indian tribe.
“This is a victory for common sense,” said U.S. Secretary of the Treasury Scott Bessent, about the announcement. “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.”
The Financial Crimes Enforcement Network (FinCEN) —the department tasked with enforcing the CTA—appears not to have gotten notice of the shift in policy in advance. Last week, after a series of court rulings that allowed the BOI reporting requirements to go forward, FinCEN noted on its website that it would issue an interim final rule that extended BOI reporting deadlines to no later than March 21, 2025.
As of this morning, the FinCEN website has not been updated to reflect Treasury’s announcement. A request for comment from FinCEN about the change was not immediately returned.
Background
Congress passed the Corporate Transparency Act, after years of discussion over the problems created by anonymous shell companies. It was part of the National Defense Authorization Act for Fiscal Year 2021. Then President Trump vetoed that law for unrelated reasons, and Congress overrode his veto in January of 2021, before President Joe Biden took office.
The Department of the Treasury officially began accepting beneficial ownership information (BOI) reports on January 1, 2024.
For purposes of the CTA (as the law was written), reporting companies can be domestic companies created under the laws of a state or Indian tribe or entities formed under the law of a foreign country registered to do business in any state or tribal jurisdiction. This can include limited partnerships, limited liability partnerships (LLPs), business trusts, LLCs (including SMLLCs), and corporations—typically, any entity you would register with the state.
There are several exemptions—in fact, 23 types of entities are exempt from the reporting requirements. These entities include publicly traded companies, nonprofits, and certain large operating companies.
The penalties for failing to comply are harsh. A person who willfully violates the reporting requirements may be subject to civil penalties of up to $500 for each day the violation continues, as well as criminal penalties of up to two years imprisonment and a fine of up to $10,000.
Under the law as written and passed by Congress, approximately 32 million companies were subject to the CTA in 2024, the first year the law was in effect. Now, however, under the most recent application by Treasury, the reporting requirement would only apply to foreign companies and the number of businesses impacted by the new rule is not clear.
Court Rulings
Months after the CTA went into effect, a federal court found it unconstitutional. The ruling resulted from a lawsuit filed by the National Small Business United (also known as the National Small Business Association, or NSBA) and Isaac Winkles. On March 1, 2024, U.S. District Judge Liles C. Burke of the Northern District of Alabama, Northeastern Division, found the CTA unconstitutional “because it exceeds the Constitution’s limits on Congress’ power.”
Since that time, multiple actions have been filed in courts across the country—including to the Supreme Court—seeking to have the rule declared unconstitutional. Just before Treasury’s most recent announcement, a court in the Eastern District of Texas ruled that beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (CTA) are back in effect. As a result, FinCEN extended the reporting deadline for most reporting companies until March 21, 2025.
What Now
The surprise announcement has left businesses with unanswered questions, including what will happen to data that has already been collected.
The law, intended to make it harder for bad actors to hide their identities and ill-gotten gains through shell companies or opaque corporate structures, pulls in companies and owners. The information was required to be reported includes details about the owners, including the name, date of birth, address, and a scanned image of an identifying document like a driver’s license or passport—from each so-called “beneficial owner.” The same information, generally, has to be reported for a company applicant—typically the person who helped organize the company (most commonly, a corporate formation company or a lawyer).
Before the announcement, millions of companies had complied, raising questions about what will happen to information that has already been submitted. A request made to FinCEN for comment about what will happen to the data was not immediately returned.
It’s also unclear what will happen to cases currently pending in court. Cases are still winding through at least four federal appellate courts—and it’s likely that additional lawsuits could be filed to force the administration to comply with the law.
Importantly, the law is still on the books. Despite Treasury’s assertions, the executive branch cannot simply overturn laws passed by Congress. It can, however, choose not to aggressively enforce a law (as we have seen in other contexts, like the criminalization of cannabis). This can lead to complications (again, as with cannabis) since a future administration could opt into enforcement.
Reactions
The National Small Business Association, which filed the first lawsuit in the nation against Treasury in response to the CTA, cheered the announcement. President and CEO Todd McCracken said, “Today is a good day for small business. I applaud the administration for seeing this law for what it is: a massive burden on America’s job creators which will do next to nothing to actually stop money-laundering. We have been beating the drum on this flawed concept for three administrations now, and I’m glad our message has finally gotten through.”
The Financial Accountability and Corporate Transparency (FACT) Coalition, a non-partisan alliance of more than 100 state, national, and international organizations, was not so enthusiastic, with executive director Ian Gary noting, “With one tweet, the Administration has contradicted fifteen years of bipartisan work by Congress to end the scourge of anonymous shell companies – which are a favorite tool of our nation’s global adversaries and criminals including fentanyl traffickers, money launderers, and tax cheats. Hollowing out the Corporate Transparency Act is an unconstitutional subversion of Congress’ intent that will not survive judicial scrutiny.”
The Main Street Alliance (MSA) believes the decision will hurt small businesses, with executive director Richard Trent declaring in a statement, “The Trump Administration’s reckless efforts to undermine the Corporate Transparency Act’s beneficial ownership reporting requirements threaten to roll back critical protections. Weakening these rules would allow bad actors to continue exploiting loopholes, harming honest small business owners and distorting the marketplace in favor of corruption. That’s why MSA stands firmly in defense of transparency and fairness—because Main Street businesses deserve better.”
Nate Sibley fellow and director of Hudson Institute’s Kleptocracy Initiative believes the decision will undermine the current administration’s supposed emphasis on drug money, saying, “This action weakens the Trump Administration’s ability to investigate cartel finances and target the profit incentives driving the deadly fentanyl and human trafficking trade across the southern border. Terrorist organizations like Hamas and Hezbollah, as well as major U.S. adversaries like Communist China, also rely on shell companies to conceal activities that threaten American security and prosperity. America’s retreat from leading efforts to uncover these shadowy financial networks is an unforced error that enriches and empowers our worst enemies.”
(Note: This is a developing story. Check back for more information.)
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