We noted in our last Corporate Transparent Act (CTA) update that on February 27, 2025, the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Treasury Department, announced that it would not take any enforcement actions against any company that does not file or update beneficial ownership information required under the CTA until after FinCEN issued a new interim rule. The Treasury Department announced yesterday that it will not enforce any penalties or fines against “U.S. citizens or domestic reporting companies or their beneficial owners” for not filing this information even after the new interim rule. Instead, the Treasury Department said that it will issue a proposed rulemaking “that will narrow the scope of the rule to foreign reporting companies only.”
U.S. Treasury Secretary Scott Bessent said: “This is a victory for common sense . . . [and the Department’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.”
We anticipate that this announcement may trigger litigation challenging the Administration’s rulemaking process or whether any proposed rule-based exemption of U.S. companies is consistent with the requirements of the CTA itself. The announcement suggests that the new rule will exempt a category of companies covered by the text of the statute, which will increase the threat of litigation.
Meanwhile, CTA litigation proceeds. In one of several cases challenging the constitutionality of the CTA, Small Business Association of Michigan v. Janet Yellen, a Michigan federal trial court judge has ruled that the CTA is unconstitutional because the statute’s beneficial ownership requirements violate the U.S. Constitution’s Fourth Amendment guarantee against unreasonable searches. It remains to be seen whether the Trump Administration will appeal this decision. Thus far, the Administration has continued to contest any court rulings finding the CTA unconstitutional.
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