What Happened To FinCEN's Corporate Transparency Act?

Highlights

• The Financial Crimes Enforcement Network's (FinCEN) Corporate Transparency Act (CTA) has faced numerous challenges to its constitutionality in recent years.
• This Holland & Knight alert provides an update as to current scope and application of the CTA after a number of recent developments.

The Corporate Transparency Act (CTA) was enacted by the U.S. Congress to eliminate anonymous shell companies and combat financial crimes. By requiring certain businesses to disclose their beneficial owners, the law aimed to prevent money laundering, terrorist financing, tax fraud and other illicit activities.

Prior to enactment of the CTA, privately held U.S. companies were not required to identify their actual owners. This enabled bad actors to conceal their identities behind anonymous structures. Under the CTA, the nonpublic federal registry data base, which was accessible by authorized law enforcement, intelligence and national security agencies to eliminate "corporate anonymity," enabled these agencies to identify the inpiduals orchestrating criminal activities and, importantly, aligned the U.S. with international beneficial ownership disclosure standards. Prior to the CTA, the U.S. was one of the only major global economies that lacked a centralized, federal beneficial ownership registry. The CTA helped align U.S. corporate governance with international standards established by the Financial Action Task Force.

The CTA shifted the burden of identifying corporate structures away from commercial banks under the Financial Crimes Enforcement Network's (FinCEN) customer due diligence rule and onto companies themselves. Under the CTA reporting framework, "reporting companies" (primarily small to midsize corporations and limited liability companies organized in the U.S. or foreign companies authorized to do business in the U.S.) were required to disclose details regarding any inpidual who exercises substantial control or holds at least a 25 percent ownership stake in the entity, unless exempted under one or more of the 23 exemptions.

On March 21, 2025,¹ FinCEN issued an interim final rule that removed the requirement for U.S. companies and U.S. persons to report beneficial ownership information (BOI) to FinCEN under the CTA.

In the interim final rule, FinCEN revised the definition of "reporting company" in its implementing regulations to mean only those entities that were formed under the law of a foreign country and 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"). FinCEN also exempted entities previously known as "domestic reporting companies" from BOI reporting requirements. Further, foreign reporting companies no longer have to report BOI about beneficial owners who are U.S. persons. Although FinCEN originally promised a final rule by the end of 2025, the bureau reported that the publication and finalization of this rule was delayed by various factors, including lapses in appropriations.

Recent Developments

Regulatory

On June 5, 2026, a final rule on the CTA's BOI reports was received by the Office of Management and Budget's Office of Information and Regulatory Affairs.

The final rule should provide guidance as to which entities will be responsible for beneficial ownership disclosures after the interim final rule exempted domestic reporting companies and the reporting of U.S. persons.

Court Proceedings

• Upholds Constitutionality: In the case of National Small Business United v. Department of the Treasury, the U.S. Court of Appeals for the Eleventh Circuit found that the CTA is within the interstate commerce authority of the Congress and does not violate the Fourth Amendment, which protects citizens from unreasonable searches and seizures. The Eleventh Circuit decision reversed a federal district court opinion that the CTA exceeds the Constitution's limits on the legislative branch and lacks a sufficient nexus to any enumerated powers to be a necessary or proper means of achieving Congress' policy goals.
• Proceedings in Abeyance: Three federal appellate courts held proceedings in abeyance as litigants awaited FinCEN's final rule. These were in the Ninth Circuit, Fourth Circuit and Fifth Circuit.
• Two Cert Petitions: There have been two petitions to the U.S. Supreme Court for certiorari. First, in the National Small Business Association case and second in Texas Top Cop Shop Inc. v. Blanch in the Fifth Circuit.

In the National Small Business Association petition, the government officially waived its right to respond. The core legal questions are whether the CTA exceeds Congress' authority under the Commerce Clause and violates the Fourth and Tenth Amendments.² The National Small Business Association argues that merely existing under state-level incorporation should not trigger a federal mandate to disclose sensitive BOI.

In the Texas Top Cop Shop Inc. petition, the core legal questions are whether the CTA exceeds Congress' enumerated powers and if it violates the Fourth Amendment.

It should be noted that on May 15, 2026, more than 90 trade associations sent a letter to the Treasury Secretary and acting U.S. Attorney General to support Supreme Court review of the CTA.

Congress

On April 21, 2026, the U.S. House Committee on Financial Services narrowly advanced a bill titled Repealing Big Brother Overreach Act (H.R. 425). This bill limits beneficial ownership reporting to foreign-owned entities and protects sensitive information already collected. It effectively codifies FinCEN's current posture, exempting domestic U.S. companies. A corresponding U.S. Senate version (see below) targets the same goals by restructuring definitions to exclude domestic U.S. persons and entities from the burdensome requirements.

On April 29, 2026, Sen. Mike Lee (R-Utah) cosponsored legislation (S. 4419) with Sen. John Kennedy (R-La.) that would turn FinCEN's narrowed interim final rule into law in an effort to protect small businesses "from burdensome and intrusive overregulation of their finances." The bill would stop the collection of personal BOI from small business owners and delete this private data from the federal government's records.

GAO Report on CTA

In May 2026, the U.S. Government Accountability Office (GAO) released a report, "Corporate Transparency: Treasury Should Address Gaps in Ownership Information Resulting from Expanded Exceptions." The report addresses the March 2025 interim final rule exemptions related to domestic companies and U.S. persons from beneficial ownership reporting requirements, which eliminates more than 99 percent of entities that previously were required to report.

The GAO prepared this report pursuant to the Anti-Money Laundering Act of 2020, which includes a provision for GAO to report on the regulation of entities exempted from beneficial ownership reporting and extent to which they pose significant illicit finance risks. The report 1) describes regulatory and reporting requirements for exempt entities, 2) assesses the extent to which such entities can pose significant risks of illicit finance activity and 3) examines the Treasury Department's plans to monitor and report on those risks.

From the GAO perspective, the crux of the issue is that U.S.-based shell companies can pose significant risks of illicit finance activity, and the 2025 domestic reporting company exemption continues that risk because of the scope of the exemption, particularly because of selected state requirements for identifying and reporting ownership and control information. What the GAO is asking is for the Treasury Department to identify the actions it would take to curtail this exposure (which the Treasury Department disagrees with) while balancing shell company misuse against regulatory burden.

Apart from the foregoing, we will see how the Financial Action Task Force views the actions of the Treasury Department in this regard when it issues its evaluation with respect to transparency related to beneficial ownership of legal persons.

Don't Forget New York State LLC Transparency Act (NY LLCTA)

The NY LLCTA took effect on January 1, 2026. It is based on the current CTA and applies only to foreign entities that are limited liability companies (LLCs) and authorized to do business in New York state. As with the CTA, beneficial owners are limited to non-U.S. persons. Do not overlook that all reporting and exempt foreign LLCs must file annually through the U.S. Department of State's system. No filings are required to be made by U.S. LLCs, including U.S. LLCs owned or controlled by non-U.S. persons.

Footnotes

1. The March 21, 2025, interim final rule followed the Treasury Department announcement of March 2, 2025, suspending enforcement of the CTA against U.S. citizens and domestic reporting companies and suspending BOI reporting penalties against domestic reporting companies and U.S. citizens.

2. The Tenth Amendment establishes the principle of federalism by stating that the federal government possesses only the powers explicitly granted to it by the U.S. Constitution. Any power not specifically delegated to the federal government is reserved for the inpidual states or the people.

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