Trump Considering Changes to Corporate Transparency Act as Debate Grows

The fate of the Corporate Transparency Act (CTA) is up in the air as lawsuits continue, with the Trump administration willing to make changes. A recent U.S. Supreme Court decision allowed enforcement to move forward but questions remain on how and when.

CTA Implementation in Limbo

The CTA was passed in 2021 to combat financial crimes like money laundering, terrorism financing, and tax fraud by requiring millions of U.S. companies to disclose their ownership to the Financial Crimes Enforcement Network (FinCEN). However, multiple lawsuits have delayed implementation, with opponents arguing the law oversteps federal authority and state regulatory powers.

One of the lawsuits is Smith v. U.S. Department of Treasury, where a judge blocked a key FinCEN rule that was meant to implement the CTA. The government has since appealed the injunction, saying the law is constitutional and needed to close loopholes used by criminal organizations.

The Supreme Court’s decision to allow enforcement while litigation proceeds put the ball in the Trump administration’s court and some policy changes can be expected in this regard. Despite vetoing the CTA in 2021, the Trump administration backed an earlier version of the bill with some changes.

FinCEN May Adjust Rules

While litigation drags on, businesses are left wondering about their reporting requirements. If the courts allow enforcement, FinCEN may grant a 30-day window for companies to file BOI reports. During that time, the agency will decide whether to prioritize high-risk companies and potentially tweak the final rule to ease the burden on lower-risk businesses.

Businesses should prepare for compliance, even as enforcement is still up in the air. Danielle Lemberg, a corporate attorney, says waiting too long could mean a last-minute rush and difficult filers.

Republican Opposition and Legislative Challenges

The Trump administration’s final position on the CTA is unknown, but Republican lawmakers and state attorneys general are opposed. Twenty-five Republican-led states asked the Supreme Court to keep a national stay in place. Sen. Thom Tillis (R-N.C.) and others have called the CTA “overreaching and unjustified,” saying it gives too much power to federal agencies.

On January 15, Sen. Tommy Tuberville (R-Ala.) and Rep. Warren Davidson (R-Ohio) introduced bills to repeal the CTA altogether, with significant Republican support in both chambers of Congress.

Despite domestic opposition, some think the CTA is still a priority for the administration because of its foreign policy implications. A recent presidential memo on Iran sanctions directed the Treasury Department to look into corporate ownership structures—a move seen as related to the CTA’s anti-money laundering provisions.

Scott Greytak, an attorney at Transparency International, says the administration’s requests for more time indicate they still see value in the law. He further added that If they were going to get rid of the CTA, they wouldn’t be asking for this.

What’s Next?

The legal battles over the CTA are far from over. Experts predict the 5th Circuit Court of Appeals will soon lift the stay and set a new compliance deadline. But even if FinCEN wins, more lawsuits are coming.

Tax attorney Niles Elber thinks enforcement will first target small businesses that don’t comply, not the big-time money launderers the law was meant to catch. He says money launderers will find a way around the law, and that will render enforcement useless.

For now, all eyes are on the final verdict. However, companies are being urged to get in compliance to avoid penalties just in case the enforcement becomes mandatory.

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