Update on the Corporate Transparency Act
Early last month, a federal judge in Texas issued a decision that halts enforcement of the Corporate Transparency Act (CTA) for now. The CTA, passed in 2021 with broad bipartisan support, was designed to make it harder for corrupt officials and other criminals to hide behind anonymously owned companies. However, Judge Amos Mazzant ruled that the CTA and its implementing rule by the U.S. Treasury Department are likely unconstitutional, claiming they exceed Congress’s authority.
As a result, companies required to report their beneficial ownership information under the CTA no longer have to meet the January 1, 2025, compliance deadline—at least for the time being.
The CTA is a common-sense transparency measure. It requires many U.S. and foreign companies to privately report simple information about their real owners (e.g., name, business address, date of birth and a passport, driver’s license or similar identification number) to Treasury’s Financial Crimes Enforcement Network (FinCEN). Before the CTA, anonymously owned companies were used to launder money stolen by corrupt officials, fund terrorism, and even support foreign threats like Iran’s nuclear program—all within the U.S.
Importantly, three other federal courts have already rejected challenges similar to the one in Texas, and I am confident that Judge Mazzant's decision will be overturned on appeal. The law has the backing of both Republicans and Democrats, including the Trump and Biden Administrations. The law and implementing rule minimize reporting, requiring less information than needed to obtain a library card. In fact, a 2024 survey of small businesses that had already registered found only 6% of reporting companies found the process very difficult.
Unfortunately, until the Fifth Circuit Court of Appeals weighs in, this ruling will undermine law enforcement and national security officials' ability to crack down on criminals—including drug traffickers, terrorists, and human traffickers—who exploit such anonymity.
But this fight is far from over: A similar case is pending before the Eleventh Circuit Court of Appeals, and Judge Mazzant himself acknowledged that his ruling is far from the final word. While there is no official timeline, we anticipate the Eleventh Circuit’s decision before the end of this year.
Director of Advocacy, Transparency International