The federal government will not enforce the Corporate Transparency Act, finally providing small-business owners who have not filed a beneficial ownership information report with some certainty.
On Sunday, March 3, the U.S. Treasury Department announced that it will “not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines.” The department said it will not enforce penalties against U.S. citizens or domestic reporting companies “after the forthcoming rule changes take effect.”
Furthermore, the Treasury Department plans to severely gut the Corporate Transparency Act.
Currently, the rules call for most U.S. small businesses – as well as any foreign company registered to do business in the U.S. – to file a beneficial ownership information report with a secretary of state. The Treasury Department will issue a proposed rulemaking that will take domestic companies off the hook while keeping the requirements for affected foreign companies.
In a statement, the Treasury Department said the move is “in the interest of supporting hard-working American taxpayers and small businesses and ensuring that the rule is appropriately tailored to advance the public interest.”
“This is a victory for common sense,” Treasury Secretary Scott Bessent said. “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.”
Effectively, all U.S. businesses no longer have to file a beneficial ownership information report. However, a formal rule must be finalized before small-business owners are officially off the hook.
The Financial Crimes Enforcement Network (FinCEN), the agency enforcing the Corporate Transparency Act, will issue an interim final rule no later than March 21. That rule will extend the beneficial ownership information reporting deadline, which is currently set for March 21. FinCEN said the interim final rule recognizes “the need to provide new guidance and clarity as quickly as possible.”
Following the announcement, President Donald Trump called beneficial ownership information reporting “outrageous and invasive” and “an absolute disaster.”
A Biden-era rule, the Corporate Transparency Act attempted to combat criminal and terrorist organizations by going after the shell companies they typically rely on to hide illegal activities. The law required most small businesses with fewer than 20 full-time employees to file a beneficial ownership information report that would expose who is behind the shell companies.
The deadline for most businesses to file a report originally was Jan. 1, but multiple federal lawsuits stopped the Treasury Department from implementing the rule. However, those court orders were reversed several times, leaving small-business owners in a state of confusion as they were taken on and then off the hook to file a beneficial ownership information report.
On Feb. 17, a federal district court paused an injunction that kept businesses off the hook, effectively reinstating the Corporate Transparency Act. At the time, the Treasury Department said small businesses would have until March 21 to file a beneficial ownership information report. The department also said it would look into modifying reporting requirements “to alleviate the burden on low-risk entities while prioritizing enforcement to address the most significant risks to U.S. national security.”
Federal court declares beneficial ownership information reporting unconstitutional
Less than 24 hours after the Treasury Department’s announcement, a federal district court judge in Michigan declared beneficial ownership information reporting requirements unconstitutional.
Judge Robert Jonker of the Western District of Michigan federal district court granted summary judgment to the Small Business Association of Michigan, finding the Corporate Transparency Act violates the Fourth Amendment.
Jonker said that although the law has good intentions, beneficial ownership information reporting requirements indiscriminately reach “the smallest players in the economy to extract and archive a trove of personal data explicitly for future law enforcement purposes.” He said the Fourth Amendment prohibits such an unreasonable search.
“In Orwell’s 1984, ‘Big Brother’ had omnipresent telescreens everywhere—including every citizen’s living room—that made sure nothing beyond a smuggled, hand-written diary was truly private,” Jonker states in the order. “The (Corporate Transparency Act) doesn’t go that far, to be sure, but it’s a step in that direction. It 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. It does so at a cost of billions of dollars to the citizens least likely to afford it.”
In addition to declaring that the Corporate Transparency Act violates the Fourth Amendment, Jonker’s judgment prohibits the federal government from enforcing the beneficial ownership information requirements on the plaintiffs in the case. The judgment, however, does not order the Treasury Department to apply the ruling to all businesses affected by the Corporate Transparency Act.
Other efforts to undo Corporate Transparency Act
With the Corporate Transparency Act still intact, it is not clear what the Treasury Department’s announcement will mean to several legal and legislative challenges.
There are at least six federal lawsuits challenging the law and its beneficial ownership information reporting requirements. Oral arguments in the case where the initial nationwide injunction was filed are set for April 1. As of the afternoon of Monday, March 3, no documents had been filed in any of the cases addressing the Treasury Department’s announcement.
In addition to legal challenges, there are two bills in Congress that address beneficial ownership information reporting and the Corporate Transparency Act. The Protect Small Business from Excessive Paperwork Act postpones the reporting deadline to Jan. 1, 2026. The bill is currently in the Senate after it was unanimously passed in the House on Feb. 10.
Another bill, the Repealing Big Brother Overreach Act, would repeal the Corporate Transparency Act entirely. The House version has 115 co-sponsors, all Republicans. In the Senate, the bill has 25 Republican co-sponsors. Both versions have been sitting in committee.
For the time being …
The Owner-Operator Independent Drivers Association is advising members that they can still voluntarily file the BOI report. However, with the entire program in limbo and a March 21 deadline for an interim final rule, given no longer than it takes to file waiting for further resolution would not be a bad idea.
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