The actions by the new Administration last week to curtail reporting under the Corporate Transparency Act were a huge victory for millions of Main Street businesses, but they were by no means the final word on the subject. To ultimately kill this ill-conceived statute, we need help from Congress or the Courts. On that front, here’s three key events in the last two weeks worth highlighting.
First, any legislative effort to repeal the CTA will have to go through the Senate and get the support of at least 60 lawmakers. Last week’s letter from Senators Sheldon Whitehouse (D-RI) and Chuck Grassley (R-IA) makes clear we have lots of work to do there. Addressed to Treasury Secretary Scott Bessent, the letter challenges the recent decision to suspend enforcement of the CTA and shift to a risk-based regulatory framework:
We acknowledge that the CTA creates a process by which the Secretary of the Treasury may exclude “an entity or a class of entities” from BOI reporting requirements so long as four conditions are met…We request that you provide us the legal basis for the Treasury Department’s policy decision to categorically suspend enforcement of the CTA’s reporting requirements for all U.S. citizens and domestic reporting companies. In addition, we request that you provide us with information about how you intend to satisfy the policy goals of the CTA.
Faced with overwhelming evidence that the CTA is ineffective and unconstitutional, some lawmakers still view it as a useful law enforcement tool (it’s not). The good news is that this letter confirms Treasury does, in fact, have the authority to exempt companies from the CTA. Here’s the statutory text alluded to in the excerpt above, which describes the exemption:
(xxiv) any entity or class of entities that the Secretary of the Treasury, with the written concurrence of the Attorney General and the Secretary of Homeland Security, has, by regulation, determined should be exempt from the requirements of subsection (b) because requiring beneficial ownership information from the entity or class of entities
(I)would not serve the public interest; and
(II)would not be highly useful in national security, intelligence, and law enforcement agency efforts to detect, prevent, or prosecute money laundering, the financing of terrorism, proliferation finance, serious tax fraud, or other crimes. [Emphasis added.]
Second, the court battle continues, with lawsuits pending in a dozen jurisdictions. Most recently, a District Court in Michigan ruled that the CTA violates the Constitution’s Fourth Amendment protections against unreasonable search and seizure. This is the second ruling on the merits that the law is unconstitutional and will help bolster the other cases.
Meanwhile, the Fifth Circuit – where the appeal of the Texas Top Cop Shop case is being litigated – is exploring what the new Treasury approach means for the future of that legal challenge. The court has asked all parties to submit briefs addressing whether the case should proceed in light of the enforcement announcement. The answer is an emphatic “yes” – the CTA is on hold for the moment but that relief depends entirely on who runs Treasury and is by no means a long-term solution.
Finally, the never-ending demand for personal and private business information is not limited to the US. Just this week, S-Corp filed comments with the United States Trade Representative highlighting how Australia’s new and ridiculously comprehensive world-wide reporting regime specifically targets US companies and amounts to a non-tariff trade barrier. As our comments note:
According to the Australian Tax Office, a “Public Country-by-Country (CBC) reporting Ultimate Parent Entities (UPE’s) need to report certain tax information on a CBC basis, to the ATO.” These reports are due as early as July 1, 2026.
…Few private companies will be willing to make the disclosures required by the new rules. This information effectively constitutes trade secrets that are extremely valuable. The ability to keep this information private is one of the benefits of being a private company and helps to offset the inability of private companies to access the global capital markets.
The concerns raised here are not theoretical. In response to the new rules, the S Corporation Association already has had member companies divest themselves of their Australian operations. Others are planning to do the same. The new reports will effectively block many US companies from doing business in Australia.
The USTR had requested feedback on how our trading partners use rules and other requirements to stifle competition, and this is certainly one of them. The new Administration likes reciprocal trade policies – what about reciprocal reporting barriers?
The recent Treasury announcement means domestic business entities don’t need to file under the CTA, for now, but the long term fight to preserve the privacy of individuals and businesses continues.