Trump’s Corporate Transparency Act Rollback Jostles Legal Fights

The Trump administration’s policy to exempt US citizens and domestic companies from needing to make disclosures under the Corporate Transparency Act barreled into several ongoing disputes about the law’s constitutionality.

The latest reporting rule undermines facial challenges brought against the CTA by domestic companies over whether the law exceeded Congress’s authority over interstate commerce, the Treasury Department told a federal appeals court in New Orleans on Tuesday. Only foreign entities now are targeted under the latest regulation, showing the law clearly falls within Congress’s enumerated powers over foreign commerce, it said.

“The Interim Final Rule highlights the overbreadth of the relief ordered by the district court,” Treasury told the US Court of Appeals for the Fifth Circuit. “Although the Interim Final Rule addresses all the injuries plaintiffs have substantiated, the district court went further and prohibited the government from enforcing the rule against foreign entities that were not before the court.”

Treasury issued its revised rule last month to end CTA enforcement against US citizens and domestic companies, rendering its registry of anonymous shell companies, which can be used to effectuate illicit financial schemes, almost useless. Previous rules from the Biden administration had required an estimated 32 million companies to disclose their beneficial owners to the federal government, but the Trump administration’s revision means only about 12,000 foreign entities will need to comply.

Disrupted Litigation

The law’s original reporting deadline had been repeatedly delayed since December 2024 by court injunctions against it and its implementing regulations. But with US companies now exempt, the status of those pending challenges remains unclear.

The National Small Business Association asked the Eleventh Circuit on Monday to uphold an Alabama court order that blocked enforcement against its members despite the rule’s revisions.

“The Government’s new defense of the CTA based on its applicability to entities formed under the law of foreign countries comes at a tellingly late stage of this litigation,” NSBA said in a supplemental brief. “The Executive Branch is not free to amend a statute mid-litigation and then provide a rationale that supports the amended statute, but not Congress’s initial handiwork.”

The government predicted that another constitutional challenge in Boston may become moot upon the final rule’s adoption later this year. The Black Economic Council of Massachusetts Inc. opposes the government’s pending motion to dismiss its constitutional challenge.

“This Rule further undermines Plaintiffs’ facial enumerated powers challenge because there can be no serious dispute that Congress has the power to regulate foreign entities that have taken the affirmative step of registering to do business in the United States,” Treasury said.

The Center for Individual Rights, SL Law PLLC, and Baker Hostetler LLP represent Texas Top Cop Shop. Hughes Hubbard & Reed LLP and Maynard Nexsen PC represent National Small Business United, operating as the National Small Business Association. Foley & Lardner LLP and Lawyers for Civil Rights represents the Black Economic Council of Massachusetts.

The cases are Texas Top Cop Shop, Inc. v. Bondi, 5th Cir., No. 24-40792, supplemental letter brief for the United States 4/8/25, Nat’l Small Bus. United v. US Dep’t of the Treasury, 11th Cir., No. 24-10736, appellee’s supplemental brief 4/7/25, and Black Economic Council of Mass. v. Bessent, D. Mass., No. 1:24-cv-11411, notice of further development 4/7/25.