INTRODUCTION

The Corporate Transparency Act (CTA), enacted on January 1, 2021, was intended to address a growing problem in the United States: money laundering.[1] The Act’s introduction drew nationwide legal attention, prompting the Supreme Court to intervene.[2] After the Court addressed the dispute, the future of the CTA seemed clear until a new direction was taken by the U.S. Department of the Treasury.[3] The twists, turns, and new focus of the CTA demonstrate the tumultuous reception of a well-intentioned Act, which later was termed the “Overreach Act.”[4]

HISTORICAL PRESENTATION

The CTA was created on January 1, 2021.[5] It was created with the intent to eliminate “corporate anonymity.”[6] Corporate anonymity “facilitates the illegal practice of money laundering” by allowing for the taking of “illicit funds (such as proceeds from drug trafficking or human trafficking) and ‘layers’ or commingles those illicit funds with legitimate funds earned from a legal business.”[7] The danger in such practices, according to the Financial Crimes Enforcement Network (FinCEN), is that it “provides the fuel for drug dealers, terrorists, arms dealers, and other criminals to operate and expand their criminal enterprises.”[8] The power of money laundering to enable criminal activity has led to it being called the “lifeblood of organized crime.”[9] Due to the prominence of money laundering, “149 other nations hav[e] adopted some form of corporate transparency legislation.”[10] In response, the United States implemented the CTA to “remedy the shortfall.”[11]

REQUIREMENTS

The CTA required “that companies disclose their beneficial owners and other information via a form in its [FinCEN] portal.”[12] A beneficial ownership information report (BOI) required disclosure of “basic information,” like the company’s “name, state of formation, principal place of business, and federal EIN … [and] a list of the reporting company’s beneficial owners.”[13] For a more detailed exploration of the requirements of the CTA, see Chris Tyler’s article, Navigating the Corporate Transparency Act: A Comprehensive Guide to Compliance and Reporting Requirements.[14] The controversy surrounding the CTA may have stemmed from FinCEN’s requirement of “mak[ing] this data available, under strict confidentiality requirements, to certain federal agencies, federal law enforcement, state law enforcement, and some foreign law enforcement agencies.”[15] Notably, this “Reporting Rule” took effect on January 1, 2024, and by December had received “nearly 10 million BOI reports.”[16]

THE LEGALITY OF THE CTA

Despite the high amount of initial reporting, the CTA was not without its legal hurdles.[17] Cases were brought to challenge the Act’s legality and constitutionality; this article will address three of them. The first challenge to the CTA was in Tex. Top Cop Shop, Inc. v. Garland.[18] The plaintiffs (the businesses) claimed the CTA was unconstitutional both facially and as applied.[19] The court heard three specific claims: “(1) the CTA intrudes upon States’ rights under the Ninth and Tenth Amendments; (2) the CTA compels speech and burdens Plaintiffs’ right of association under the First Amendment; and (3) the CTA violates the Fourth Amendment by compelling disclosure of private information.”[20] Ultimately, the district court concluded that the plaintiffs had met their burden on the first issue presented, and did not address “the issue of the CTA’s constitutionality as applied to these Plaintiffs or Plaintiffs’ challenges under the First and Fourth Amendments.”[21] The court granted a nationwide preliminary injunction barring enforcement of the CTA.[22] In doing so, the court determined, “[t]he CTA is likely unconstitutional as outside of Congress’s power. Because the Reporting Rule implements the CTA, it is likely unconstitutional for the same reasons.”[23]

The decision was appealed, and only twenty days later, the Fifth Circuit Court of Appeals issued a counter decision.[24] The circuit court explained that the harm to the businesses would be minimal, and “[w]hen balancing this harm against the public’s urgent interest in combatting financial crime and protecting our country’s national security, equity favors a stay.”[25] Resulting in the grant in favor of the government’s “emergency motion for a stay” on the injunction, thereby reinstating the CTA.[26]

After that decision, only three days later, on December 26, 2024, the Fifth Circuit reinstated the injunction, “in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments, that part of the motions-panel order granting the Government’s motion to stay the district court’s preliminary injunction enjoining enforcement of the CTA and the Reporting Rule is VACATED.”[27]

Finally, the Fifth Circuit’s back-and-forth resulted in the government’s appeal to the United States Supreme Court.[28] The Court did not formally address the issue, only stating in its opinion that the injunction was “stayed pending the disposition of the appeal in the United States Court of Appeals for the Fifth Circuit and disposition of a petition for a writ of certiorari, if such a writ is timely sought.”[29] But interestingly, the Court went on to state, “[s]hould certiorari be denied, this stay shall terminate automatically.”[30] Therefore, if, after the Fifth Circuit’s decision was made, and if the United States Supreme Court denied a writ, the injunction would be stayed once again.[31] These decisions ultimately left the CTA’s constitutionality in the hands of the Fifth Circuit.

The second Texas case to address the CTA was Smith v. United States Dep’t of the Treasury.[32] In this case, due to the decision of the United States Supreme Court, the Smith court granted a stay on the injunction of the “effective date of the Reporting Rule.”[33] Thereby, leaving no withstanding injunctions to “restrain the enforcement of the CTA.”[34] Following the Supreme Court’s ruling, “FinCEN announced that reporting companies formed before January 1, 2024, would be required to file their initial BOI reports no later than March 21, 2025.”[35]

The third case, Small Bus. Ass’n of Mich. v. Yellen challenged the CTA on Fourth Amendment grounds.[36] The court concluded, “[the CTA] compels citizens to disclose private information they are not required to disclose anywhere else just so the government can sit on a massive database to satisfy future law enforcement requests.”[37] Relating the CTA to an Orwellian “Big Brother” that “had omnipresent telescreens everywhere—including every citizen’s living room.”[38] The court limited that analogy, saying the CTA “doesn’t go that far,” but  “it’s a step in that direction.”[39] Finally holding, the CTA “amounts to an unreasonable search prohibited by the Fourth Amendment.”[40] As of the writing of this article, the case is currently pending appeal, and thus, there has been no final decision on whether the CTA violates the Fourth Amendment.[41]

CONTINUED ENFORCEMENT

Ultimately, the tumultuous legal path that the CTA endured would not lead to enforcement, at least not in the initially intended sense. On March 2, 2025, the Treasury Department announced that it would “not enforce any penalties or fines associated with the [BOI] reporting rule under the existing regulatory deadlines … [and] will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners.”[42]

In response to that announcement, FinCEN issued its own on March 21, 2025.[43] FinCEN issued a “final interim rule” that “removes the requirement for U.S. companies and U.S. persons to report beneficial ownership information (BOI) to FinCEN under the Corporate Transparency Act.”[44] It also revised the definition of “reporting company” to “only those entities that are formed under the law of a foreign country and that have registered to do business in any U.S. State or Tribal jurisdiction by the filing of a document with a secretary of state or similar office (formerly known as “foreign reporting companies”).”[45]

Effectively, the CTA is not enforced against “all entities created in the United States — including those previously known as ‘domestic reporting companies’ — and their beneficial owners will be exempt from the requirement to report BOI to FinCEN.”[46] Thus, the CTA shifted focus squarely on foreign-owned companies.[47] But interestingly, “[t]hese foreign entities … will not be required to report any U.S. persons as beneficial owners, and U.S. persons will not be required to report BOI with respect to any such entity for which they are a beneficial owner.”[48] Therefore, the CTA has undergone a metamorphosis, having been transformed through legal battles and a change in focus.

CONCLUSION

The CTA, although short in life span, has experienced significant turmoil in its efforts to reduce money laundering. The current iteration of the CTA has narrowed its original focus to foreign companies.[49] According to the U.S. Secretary of the Treasury Scott Bessent, “[t]oday’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.”[50] As of the writing of this article, the Act’s future is still uncertain. Congressional members introduced the Repealing Big Brother Overreach Act to Congress on January 1, 2025.[51] This proposed act was introduced to repeal the CTA.[52] There has been no decision on this proposed bill, but it’s name alone suggests the CTA is far from safe, prolonging the turbulence within its controversial life.[53]

The CTA, a polarizing Act, has made waves. Despite the adoption of similar provisions by other countries, the CTA has failed to take hold in the United States. The refocusing of the Act on foreign companies, with caveats, has seemingly not changed the view of some members of Congress. As of now, the Act’s future is unclear, but uncertainty can be weighed in multiple ways: on the one hand, it shows the fading of good intentions through legal transformation; on the other, it showcases a still-lasting commitment to halt financial crimes, just in a different form than was initially anticipated.

[1] See generally Jonathan B. Wilson, The Status of the Corporate Transparency Act, LEXISNEXIS (March 17, 2025), https://plus.lexis.com/document/documentlink?pdmfid=1530671&pddocfullpath=%2Fshared%2Fdocument%2Fanalytical-materials%2Furn%3AcontentItem%3A6FBW-71N3-RRS9-83MJ-00000-00&pdcontentcomponentid=500750&pdproductcontenttypeid=urn%3Apct%3A306&pdpinpoint=&pdrt=undefined&pdparentactivityid=undefined&ecomp=6d4k&pdvirtualmasterfeatureid=&prid=28a96a6b-2855-4134-84d2-cd98ddc34580&crid=bd4439ff-ee9b-422e-8455-63649b6d871c#/1a0f9e9d-411d-42da-b9e8-4d2249d7f954.

[2] Id.

[3] See generally Treasury Department Announces Suspension of Enforcement of Corporate Transparency Act Against U.S. Citizens and Domestic Reporting Companies, U.S. DEP’T OF THE TREASURY (March 2, 2025), https://home.treasury.gov/news/press-releases/sb0038.

[4] Repealing Big Brother Overreach Act, H.R. 425, 119th Cong. (Jan. 15, 2025).

[5] The Status of the Corporate Transparency Act, supra note 1.

[6] Chris Tyler, Navigating the Corporate Transparency Act: A Comprehensive Guide to Compliance and Reporting Requirements AVE MARIA SCH. OF L (Jan. 21, 2025), https://www.avemarialaw.edu/navigating-the-corporate-transparency-act/.

[7] The Status of the Corporate Transparency Act, supra note 1.

[8] FinCEN, What is money laundering? FIN. CRIMES ENF’T NETWORK, https://www.fincen.gov/what-money-laundering (last visited Apr. 22, 2026).

[9] The Status of the Corporate Transparency Act, supra note 1 (citations omitted).

[10] Id.

[11] Id.

[12] Chris Tyler, supra note 6.

[13] The Status of the Corporate Transparency Act, supra note 1.

[14] See generally Chris Tyler, supra note 6.

[15] The Status of the Corporate Transparency Act, supra note 1.

[16] Id.; see also Declaration of Andrea Gacki, filed with the U.S. District Court for the Eastern District of Texas (Sherman Division) in Texas Top Cop Shop, Inc. v. Garland (C.A. No. 4:24-cv-478-ALM) (Dec. 11, 2024).

[17] Id.

[18] See generally Tex. Top Cop Shop, Inc. v. Garland, 758 F. Supp. 3d 607 (E.D. Tex. 2024).

[19] Id.

[20] Id.

[21] Id. at 663.

[22] Id.

[23] Id.

[24] The Status of the Corporate Transparency Act, supra note 1.

[25] Tex. Top Cop Shop, Inc. v. Garland, No. 24-40792, 2024 U.S. App. LEXIS 32565, at *9 (5th Cir. Dec. 23, 2024).

[26] Id.

[27] Tex. Top Cop Shop, Inc. v. Garland, No. 24-40792, 2024 U.S. App. LEXIS 32702, at *4 (5th Cir. Dec. 26, 2024).

[28] The Status of the Corporate Transparency Act, supra note 1.

[29] McHenry v. Tex. Top Cop Shop, Inc., 145 S. Ct. 1, 1 (Jan 23, 2025).

[30] Id.

[31] Id.

[32] The Status of the Corporate Transparency Act, supra note 1.

[33] Smith v. United States Dep’t of the Treasury, 761 F. Supp. 3d 952, 974 (E.D. Tex. 2025).

[34] The Status of the Corporate Transparency Act, supra note 1.

[35] Id.

[36] See generally Small Bus. Ass’n of Mich. v. Yellen, 769 F. Supp. 3d 722 (W.D. Mich. 2025).

[37] Id. at 739.

[38] Id.

[39] Id.

[40] Id.

[41] Id.

[42] Treasury Department Announces Suspension of Enforcement of Corporate Transparency Act Against U.S. Citizens and Domestic Reporting Companies, U.S. DEP’T OF THE TREASURY (March 2, 2025), https://home.treasury.gov/news/press-releases/sb0038.

[43] FinCEN Removes Beneficial Ownership Reporting Requirements for U.S. Companies and U.S. Persons, Sets New Deadlines for Foreign Companies, FINCEN (March 21, 2025), https://www.fincen.gov/news/news-releases/fincen-removes-beneficial-ownership-reporting-requirements-us-companies-and-us.

[44] Id.

[45] Id.

[46] Id.

[47] Treasury Department Announces Suspension of Enforcement of Corporate Transparency Act Against U.S. Citizens and Domestic Reporting Companies, supra note 42.

[48] FinCEN Removes Beneficial Ownership Reporting Requirements for U.S. Companies and U.S. Persons, Sets New Deadlines for Foreign Companies, supra note 43.

[49] Id.

[50] Treasury Department Announces Suspension of Enforcement of Corporate Transparency Act Against U.S. Citizens and Domestic Reporting Companies, supra note 42.

[51] Repealing Big Brother Overreach Act, H.R. 425, 119th Cong. (Jan. 15, 2025).

[52] Id.

[53] Id.