US Treasury Suspends Enforcement of Corporate Transparency Act

The U.S. Department of the Treasury said it will no longer enforce an ownership reporting requirement that impacted an estimated 34 million small business owners.

The Corporate Transparency Act (CTA) was enacted in January 2021 and required most small businesses to share beneficial ownership information, meaning information about the identities of individuals with a significant ownership stake in the company.

The law was designed to counter illicit financial activity, including tax fraud, money laundering, and terrorist financing. Failure to adhere to the reporting mandate led to fines of up to $10,000 and a two-year prison term.

On Sunday, the Treasury announced it was suspending CTA enforcement against U.S. citizens and domestic reporting companies. The department shall “not enforce any penalties or fines associated with the beneficial ownership information reporting rule.”

According to the U.S. Chamber of Commerce, a beneficial owner “has a major influence on the reporting company’s decisions or operations, owns at least 25 percent of the company’s shares, or has a similar level of control over the company’s equity.”

For foreign reporting companies, the Treasury is looking to narrow the scope of the rule.

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Supporters of CTA argue that reporting beneficial owners is critical to plug business loopholes exploited by criminal groups. The Treasury had earlier justified the rule as a vital tool to combat financial crimes.

“Unmasking shell corporations is the single most significant thing we can do to make our financial system inhospitable to corrupt actors,” former Treasury Secretary Janet Yellen had said about the rule.

According to the Treasury, the recent decision was taken to support hard-working Americans and small businesses.

“This is a victory for common sense,” said U.S. Secretary of the Treasury Scott Bessent. “Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy.”

However, the matter passed through various courts, with the U.S. Court of Appeals for the Fifth Circuit issuing a nationwide injunction in late December that stopped the rule. A federal court lifted the injunction in February, with businesses having to comply with reporting requirements by March 21, the U.S. Chamber said.

The Treasury’s recent suspension of CTA enforcement now resolves the matter, with ownership reporting no longer necessary

The decision comes as President Donald Trump signed an executive order on Jan. 31—Unleashing Prosperity Through Deregulation—that called on agencies to restrict the number of regulations.

The order also asked that agencies remove 10 existing policies for every new rule they enact. The order aims to remove regulatory obstacles to economic growth.

“The ever-expanding morass of complicated federal regulation imposes massive costs on the lives of millions of Americans, creates a substantial restraint on our economic growth and ability to build and innovate, and hampers our global competitiveness,” the order said.

According to the National Archives, there are more than 200,000 federal regulations in the United States.

Critics say that deregulation threatens issues such as labor rights and environmental protection. However, supporters argue that too much regulation stunts business expansion.

According to a December survey from the U.S. Chamber, 51 percent of small businesses reported that navigating regulatory requirements was negatively affecting their growth. Another 47 percent said they spent too much time complying with regulations.

“Too many regulations cause big headaches for small businesses, even if they feel confident in their ability to comply or have the means to outsource compliance tasks,” said Tom Sullivan, the group’s vice president of small business policy.