Remember “CTA Light”?
Do you recall the relief you felt when, in early March of 2025, the Treasury Department announced that it would not enforce any penalties or fines associated with the beneficial ownership information (“BOI”) reporting rule under the then existing regulatory deadlines issued under the Corporate Transparency Act (the “CTA”)?
What about the elation that followed when, in the same breath, the Treasury added that it would be issuing proposed rules that would narrow the scope of the BOI disclosure rule to foreign reporting companies only?[i]
The Interim Final Rule
Just a few weeks later, the Financial Crimes Enforcement Network (“FinCEN”) announced that it would soon be issuing an interim final rule that would remove the requirement for U.S. companies and other U.S. persons to report BOI to FinCEN under the CTA.[ii]
This interim final rule was issued in late March of 2025.[iii] According to its Preamble, the newly elected Administration, seeking to “alleviate unnecessary regulatory burdens placed on the American people,”[iv] and consistent with the exemptive authority provided in the CTA, had “reassessed the balance between the usefulness of collecting BOI and the regulatory burdens imposed by the scope of the Reporting Rule.”
Specifically, FinCEN revised the definition of “reporting company” in its implementing regulations to mean only those entities that are formed under the law of a foreign country and that have registered to do business in any U.S. State by the filing of a document with a secretary of state or similar office.[v] FinCEN also exempted entities previously known as “domestic reporting companies” from BOI reporting requirements; this included all entities created in the U.S., as well as their beneficial owners.
But wait, there was more.
Although foreign entities – under the new definition of a “reporting company” – were generally required to report their BOI to FinCEN under the new rules, they were not required to report any U.S. persons as beneficial owners. What’s more, U.S. persons were not required to report BOI with respect to any such foreign entity in which they were a beneficial owner.[vi]
Immediate Aftermath
At that point, it appeared to many advisers, and probably most business owners, that the Congressional overreaching manifested in the passage of the CTA had been successfully curtailed.[vii]
Based on some recent developments, however, it appears that the
celebration of their “victory,” over what opponents of the CTA had described as the intrusiveness of the Federal government, may have been short-lived.
Challenging the CTA
Not long after the enactment of the CTA, and well before FinCEN
issued the above-referenced revised regulations to limit the scope of the BOI disclosure rules, several lawsuits were filed in the Federal courts, on behalf of various businesses and business groups, to challenge the law on the grounds that it exceeded Congress’s enumerated powers – i.e., to regulate interstate commerce,[viii] to “lay and collect taxes,”[ix] to advance the national security and foreign policy interests of the U.S.[x] – as well as its authority to enact such laws as are “necessary and proper”[xi] to carry out the foregoing powers.
NSBU
Soon after the first set of “final” reporting rules were issued – under the prior Administration – the first set of legal challenges to the CTA was initiated when, in November 2022, National Small Business United[xii] filed a complaint in the U.S. District Court for the Northern District of Alabama claiming the CTA exceeded Congress’s enumerated powers and, therefore, was unconstitutional (the “NSBU litigation”).
On March 1, 2024 – only two months after the initial version of the reporting rules became effective[xiii] – the District Court in the NSBU litigation concluded that the CTA was “unconstitutional because it cannot be justified as an exercise of Congress’s enumerated powers” – it did not regulate commercial or economic activity but only the act of incorporation. With that, the District Court enjoined FinCEN from enforcing the Act against the plaintiffs.[xiv]
On March 11, the Justice Department filed a Notice of Appeal to the Eleventh Circuit Court of Appeals on behalf of the Treasury; the Circuit Court granted expedited review and scheduled oral Arguments for September 2024.
That same day, FinCEN issued a notice in which it stated that, while the NSBU litigation was ongoing, FinCEN would continue to implement the Act as required by Congress, while complying with the District Court’s order; thus, other than the individuals and entities subject to the District Court’s injunction, all other reporting companies were still required to comply with the CTA and file BOI reports as provided in FinCEN’s regulations.[xv]
Of course, a new Administration took office in January 2025 and, by the end of March 2025, the CTA’s reach had been limited.
Then, toward the end of 2025, the Eleventh Circuit Court of Appeals issued its opinion in the NSBU litigation.[xvi]
The Eleventh Circuit
The issue before the Circuit Court was whether the CTA was constitutional.
According to the Court, most states do not require businesses to report information about their owners. The Court explained that bad actors were using the anonymity afforded by state corporate laws to commit financial crimes, such as money laundering and financing terrorism; i.e., crimes “affecting interstate and international commerce.” Congress, the Court continued, found that this information gap hampered law enforcement’s efforts to fight such crimes.
To prevent these anonymous business dealings, the Court stated, Congress passed the CTA, which requires certain corporate entities to report their “beneficial owners” – i.e., the actual people who exercise control over the entity – to the Treasury Department.
The Court stated that, in order to be constitutional, every federal law must be consistent with one of Congress’s enumerated powers and must not violate any of the Constitution’s guarantees of individual rights.
The plaintiff, National Small Business United – a business association representing “over 65,000 businesses . . . located in all 50 states,” with members from every sector of the U.S. economy – argued that the CTA failed on both counts. It claimed that the CTA was not an appropriate exercise of Congress’s power to regulate interstate commerce[xvii] and was therefore facially unconstitutional.[xviii]
The District Court had concluded that the CTA did not regulate economic activity and, on that basis, granted summary judgment for the plaintiff.
According to the District Court, neither the commerce, taxing, and necessary-and-proper clauses, nor Congress’s foreign affairs and national security powers, justified the CTA. Regarding the Commerce Clause, the District Court ruled that the CTA primarily regulates the non-commercial act of incorporation and that the connection between the act of incorporation and the activities Congress sought to curb was too attenuated. The District Court also emphasized the lack of any “jurisdictional hook” in the CTA that limited its reach to interstate commerce.
The Court of Appeals disagreed with the lower court’s decision, and found that, by effectively prohibiting anonymous business dealings, the CTA facially regulated economic activities having a “substantial aggregate impact” on interstate commerce.
According to the Circuit Court, the CTA is a constitutional exercise of Congress’s power under the Commerce Clause. By regulating activity that is economic in nature,[xix] it effectively “prohibits anonymous corporate dealings, regulates commercial entities that are active in the stream of commerce,” and requires them to report information related to their ownership.
The Court also determined that Congress had rationally concluded, based on input from numerous national security and law enforcement experts about how anonymous shell companies affect interstate and international commerce, that anonymous corporate dealings have a substantial aggregate effect on interstate commerce.
Accordingly, the Court of Appeals reversed the District Court.[xx]
Application for Cert
In April 2026, NSBU filed a Petition for Writ of Certiorari with the U.S. Supreme Court[xxi] in which it asked the Supreme Court to consider the Constitutional issues raised by, and to reverse the decision of, the Eleventh Circuit.[xxii]
Unfortunately for NSBU, on October 6, 2026, the Supreme Court declined to review the decision of the Court of Appeals.[xxiii] Thus, the Circuit Court’s decision stands.
Where Does That Leave Us?
What can be deduced from the Supreme Court’s denial of cert? Not much.
The denial of cert does not necessarily indicate that the Supreme Court agreed with the Eleventh Circuit’s analysis of the CTA and its holding in the NSBU litigation.
Nor does the denial have any precedential value. Instead, the denial leaves the Circuit Court’s decision intact, but only with respect to matters within that Court’s appellate jurisdiction.
The foregoing technical or procedural questions aside, the CTA remains the law of the land, and the Circuit Court’s opinion supports the scope of the CTA as enacted, as well as FinCEN’s original interpretation of the legislation.
Query, therefore, the practical effect the Circuit Court’s decision (and the subsequent denial of cert) may have on the outcome of other Constitutional challenges to the CTA in other Circuits, or on whether such challenges will even be mounted.
Query also whether the Circuit Court’s decision may embolden a future Administration to use its regulatory authority under the CTA to restore its coverage of domestic reporting entities. I think it will, especially as the Federal government necessarily increases its tax collection efforts with the assistance of new technologies that can convert the raw data gathered though the CTA into pursuable leads.
Stay tuned.
The opinions expressed herein are solely those of the author(s) and do not necessarily represent the views of the firm.
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[i] https://home.treasury.gov/news/press-releases/sb0038#:~:text=The%20Treasury%20Department%20is%20announcing,January%202%2C%202026.
[ii] https://www.fincen.gov/news/news-releases/fincen-removes-beneficial-ownership-reporting-requirements-us-companies-and-us.
[iii] https://www.federalregister.gov/documents/2025/03/26/2025-05199/beneficial-ownership-information-reporting-requirement-revision-and-deadline-extension.
[iv] On January 31, 2025, President Trump issued Executive Order 14192, Unleashing Prosperity Through Deregulation.
[v] Why the Change? The interim final rule is ostensibly rooted in the Treasury Department’s authority under the CTA to exempt any “entity or class of entities” for which the Secretary of the Treasury, with the written concurrence of the Attorney General and the Secretary of Homeland Security, has determined that “requiring beneficial ownership information from the entity or class of entities” – in this case, the class comprising domestic reporting companies and their beneficial owners – “would not serve the public interest” and “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.”
By contrast, the Treasury Department determined that foreign reporting companies – other than those the beneficial owners of which are all U.S. persons – present heightened national security and illicit finance risks.
[vi] FinCEN also issued some helpful questions and answers (Q&As) in anticipation of inquiries relating to the interim final rule. https://www.fincen.gov/boi/ifr-qa.
[vii] In December 2020, Congress sent the CTA to the President for his signature. Although the Administration supported the CTA, it was included in the bill for the National Defense Authorization Act, which the President vetoed for reasons unrelated to the CTA. As we know, his veto was overridden [the House voted 322-87, and the Senate voted 81-13, to override the veto] and the bill thereby became law, effective January 1, 2021.
[viii] The Constitution of the United States, Article I, Section 8, Clause 3.
[ix] The Constitution of the United States, Article I, Section 8, Clause 1.
[x] The Constitution of the United States, Article I, Section 8, generally; for example, foreign commerce, war powers, armed forces.
[xi] The Constitution of the United States, Article I, Section 8, Clause 18.
[xii] A business league described in IRC Sec. 501(c)(6).
[xiii] You’ll recall that the CTA required “reporting companies” to submit specified beneficial ownership information (“BOI”) to FinCEN. 31 U.S.C. 5336. However, the statutory requirement for reporting companies to submit BOI was to take effect “on the effective date of the regulations” implementing the reporting obligations. 31 U.S.C. 5336(b)(5): ‘‘(5) EFFECTIVE DATE — The requirements of this subsection shall take effect on the effective date of the regulations prescribed by the Secretary of the Treasury under this subsection, which shall be promulgated not later than 1 year after the date of enactment of this section.”
FinCEN issued final BOI reporting rules on September 30, 2022, with an effective date of January 1, 2024. Published Document: 2022-21020 (87 FR 59498). As issued, the rules required (a) companies formed before January 1, 2024 to file a BOI report with FinCEN by December 31, 2024, and (b) companies created on or after the rule’s effective date (of January 1, 2024) and before January 1, 2025, to file within 30 calendar days of notice of their creation. About one year later, the reporting rules were amended to provide an extended filing deadline of 90 calendar days for reporting companies created on or after January 1, 2024 and before January 1, 2025; entities created on or after January 1, 2025 would continue to have 30 calendar days from notice of their creation to file their BOI reports with FinCEN. Published Document: 2023-26399 (88 FR 83499).
[xiv] National Small Business United, d/b/a National Small Business Association, et al., v. Janet Yellen, in her official capacity as Secretary of the Treasury, et al., No. 5:22-cv-01448 (N.D. Ala.).
In December of 2024, a Texas district court issued a nationwide preliminary injunction that enjoined enforcement of the CTA’s reporting requirements. Texas Top Cop Shop, Inc. et al., v. Garland et al.. Docket No. 4:24-cv-00478 (E.D. Tex. Dec. 3, 2024). The Fifth Circuit stayed the District Court’s injunction, but reversed itself a couple of days later.
The U.S. Supreme Court stayed this injunction on January 23, 2025.
[xv] https://www.fincen.gov/news/news-releases/updated-notice-regarding-national-small-business-united-v-yellen-no-522-cv-01448.
On May 20, 2024, twenty-two States joined in filing an amicus brief with the Eleventh Circuit in which they urged the Court to affirm the March 1 decision by the District Court in Alabama, based largely on principles of federalism. https://assets.law360news.com/1839000/1839407/https-ecf-ca11-uscourts-gov-n-beam-servlet-transportroom-servlet-showdoc-011013344879.pdf,: Alabama, Arkansas, Florida, Georgia, Idaho, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, Ohio, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, and Wyoming.
[xvi] https://media.ca11.uscourts.gov/opinions/pub/files/202410736.pdf.
[xvii] The Constitution of the United States, Article I, Section 8, Clause 3.
[xviii] In the alternative, the plaintiff asserted that the CTA violated the Fourth Amendment’s prohibition on unreasonable searches and was facially unconstitutional for that reason.
The Fourth Amendment protects “[t]he right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures.”
Ultimately, the Circuit Court found that, as a uniform and limited reporting requirement, the CTA did not facially violate the Fourth Amendment.
[xix] A law can regulate economic activity, the Court stated, even if the connection between the challenged law and commerce isn’t “airtight.” It is enough that the regulated activity involves “some sort of economic endeavor” with “an apparent commercial character.”
[xx] National Small Business United et al. v. U.S. Department of the Treasury et al., case number 24-10736 (11th Cir.) (judgement entered December 16, 2025.)
[xxi] https://www.supremecourt.gov/search.aspx?filename=/docket/docketfiles/html/public/25-1201.html.
[xxii] https://cdn.prod.website-files.com/69adfa37e3a4b7b1e78df8f8/6a735fd15b269cdc51b0a1d4_fec11a_1eec0089bea943ff9ef5f6ed0ac5454e.pdf.
[xxiii] According to the Supreme Court’s rules, four of the nine Justices must vote to accept a case. Thus, we know that fewer than four Justices were in favor of reviewing the decision of the Circuit Court. https://www.uscourts.gov/about-federal-courts/educational-resources/about-educational-outreach/activity-resources/supreme-court-procedures.