Treasury Reveals It Will Not Enforce Penalties Under Corporate Transparency Act

The U.S. Treasury Department says it will not enforce penalties related to the Corporate Transparency Act against American citizens and businesses.

Key Insights

The Treasury will not enforce penalties under the Corporate Transparency Act against U.S. citizens or domestic companies while proposing to narrow its scope to foreign entities only.
The Act, which took effect January 1, 2024, has faced significant opposition from the Trump administration, with President Donald Trump calling it “outrageous and invasive” for small businesses.
A federal court in Alabama ruled the Act unconstitutional in March 2024, determining Congress exceeded its authority.
Supporters argue the law is essential for combating money laundering through shell companies, while critics call it government overreach.
The decision doesn’t eliminate the law entirely, allowing the government to potentially pursue other financial transparency measures.

Treasury’s Decision and Political Response

The U.S. Treasury Department announced it will not enforce penalties related to the Corporate Transparency Act (CTA) or its Beneficial Ownership Information (BOI) reporting requirements against American citizens or domestic businesses. This anti-money laundering law, passed in January 2021 and implemented at the beginning of 2024, has become a flashpoint in discussions about government regulation and financial security. President Donald Trump celebrated the decision, calling it “exciting news.”

Secretary of the Treasury Scott Bessent called the decision a “victory for common sense,” echoing the administration’s position that the requirements placed undue burden on American businesses, particularly smaller enterprises.

Legal Challenges and Constitutional Questions

The Treasury’s decision follows significant legal challenges to the Act. In March 2024, a federal court in Alabama ruled the CTA unconstitutional, determining that Congress had exceeded its constitutional authority in creating the law. This ruling provided additional momentum for opponents of the measure. Alabama Senator Tommy Tuberville has been among the vocal critics, characterizing the Act as government overreach that imposes unnecessary burdens on small business owners.

The Act requires certain businesses to report information about their beneficial owners to a database maintained by the Financial Crimes Enforcement Network (FinCEN). Notably, the law exempts larger companies with over 20 employees and $5 million in annual revenue, focusing its requirements primarily on smaller entities. This approach has been criticized as paradoxically placing greater regulatory burdens on businesses with fewer resources to manage compliance.

The Treasury Department is announcing today that, with respect to the Corporate Transparency Act, not only will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines…

— Treasury Department (@USTreasury) March 2, 2025

Competing Perspectives on Financial Transparency

The FACT Coalition and other transparency advocates have criticized pushback against the rule, arguing it creates opportunities for shell companies to hide illicit funds from law enforcement. They maintain that the CTA was specifically designed to address the use of anonymous shell companies for money laundering, tax evasion, and other financial crimes. Without enforcement, they warn, the United States could become an even more attractive destination for illicit financial activities.

Conversely, business groups and administration officials have welcomed the Treasury’s decision, citing the compliance costs that would otherwise fall on millions of small businesses. Trump described the requirements as an “absolute disaster” for small business owners. The Treasury now plans to propose legislation narrowing the Act’s scope to apply only to foreign reporting companies, which would significantly reduce the number of entities subject to the reporting requirements.

International Implications and Future Outlook

Despite the current non-enforcement stance, the Corporate Transparency Act remains on the books. The decision does not eliminate the law entirely, meaning that future administrations could reverse course on enforcement priorities.The Treasury also reportedly plans to propose narrowing the law to apply to just foreign reporting companies. Additionally, other federal agencies may continue to pursue alternative means of enhancing financial transparency and combating illicit finance through existing regulatory frameworks and law enforcement mechanisms.