Major Relief for American Small Businesses on Corporate Transparency Act Compliance

In a significant policy shift, the Treasury Department announced on March 2, 2025, that it will not enforce penalties or fines associated with the Corporate Transparency Act (CTA) against U.S.citizens or domestic reporting companies.

This announcement comes just weeks before the March 21, 2025 (extended from its original date of January 1, 2025) compliance deadline that many small business owners have been rushing to meet.

"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."

Rule to be Narrowed to Foreign Reporting Companies Only

The Treasury Department will be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only, significantly reducing the regulatory burden on American-owned businesses.

“The U.S. Treasury Department said it won’t take enforcement action against American companies for not divulging ownership information under the Corporate Transparency Act as part of the Trump administration’s efforts to cut regulation for small businesses,”reported the Wall Street Journal.

The publication also said the suspension, first announced Sunday night in a post on the department’s X account, came as the CTA was put in effect again after a federal judge in Texas reversed a national injunction last month.

“Treasury’s Financial Crimes Enforcement Network, which oversees the enforcement of the law, already said it was extending the filing deadline for most companies to March 21 and wouldn’t issue any penalties or fines or take any enforcement actions over noncompliance before that deadline,” reported the Wall Street Journal.

What This Means for Your Business

If you own a U.S.-based business that was preparing to file beneficial ownership information (BOI) reports:

• No penalties or fines will be enforced against U.S. citizens or domestic reporting companies.
• The requirement is expected to be eliminated entirely for domestic companies through forthcoming rule changes.
• Only foreign reporting companies will need to comply with CTA requirements going forward.

Background on the Corporate Transparency Act

For those unfamiliar with the CTA, it was introduced as part of the Anti-Money Laundering Act of 2020 and enacted through the National Defense Act for Fiscal Year 2021 under the previous administration.

The law required many companies formed or operating in the United States to report information about their beneficial owners to Treasury's Financial Crimes Enforcement Network (FinCEN), which would store this sensitive information in a secure database.

Original Filing Requirements That No Longer Apply to U.S. Businesses

Under the original requirements, reporting deadlines were:

• Existing companies: Reporting companies created or registered before January 1, 2024, had until January 1, 2025 to file (extended to March 21, 2025).
• Newly created companies: Companies created in 2024 had 90 calendar days to file after formation (30 days for those created after December 21, 2024).

The beneficial ownership information that was previously required included:

• Name
• Date of birth
• Address
• Identifying document information (driver's license, passport, etc.)
• An image of the identifying document

Why the CTA Was Originally Enacted

The CTA was aimed at preventing illicit actors from concealing their ownership of U.S. companies to facilitate activities such as:

• Money laundering
• Financing of terrorism
• Serious tax fraud
• Human and drug trafficking
• Various forms of financial fraud

"Unmasking shell corporations is the single most significant thing we can do to make our financial system inhospitable to corrupt actors," Treasury Secretary Janet Yellen had stated when implementing the regulations.

Who Was Subject to the Original Requirements

Prior to today's announcement, the CTA applied to domestic and foreign entities that filed formation or registration documents with a U.S. State (primarily Corporations and LLCs) unless they qualified for exemptions.

Companies were exempt if they:

• Employed more than 20 people in the U.S.
• Had gross revenue over $5 million on the prior year's tax return
• Maintained a physical office in the U.S.
• Were publicly traded companies registered under Section 102 of the Sarbanes-Oxley Act.

The focus was primarily on smaller businesses and "shell companies" that were generally not subject to supervision by other regulatory agencies or had fewer than 21 employees and less than $5 million in annual U.S. revenue.

What's Next for American Businesses

With this new directive from the Treasury Department, U.S. small business owners can breathe a sigh of relief. The compliance burden and potential for severe penalties — which included up to two years imprisonment and fines up to $10,000, plus civil penalties of up to $591 per day — have been removed.

This represents a significant regulatory rollback by the Trump administration, which has pledged to reduce bureaucratic requirements for American businesses.

What About Foreign Companies?

Foreign reporting companies will still be required to comply with CTA requirements. The Treasury Department's announcement specifically stated that the enforcement relief and forthcoming rule changes apply only to U.S. citizens and domestic reporting companies.

Foreign-owned businesses operating in the United States should continue to prepare their beneficial ownership information reports according to the original deadlines, as penalties may still apply to these entities.

Professional Guidance

While domestic companies no longer face enforcement actions, businesses with complex ownership structures or significant foreign ownership may still want to consult with legal or accounting professionals to determine their obligations under the revised approach.

If you have questions about how this policy change affects your specific situation, particularly for businesses with mixed domestic and foreign ownership, consulting with a knowledgeable advisor is recommended.

This dramatic shift in CTA enforcement represents one of the Trump administration's major regulatory changes following the January 2025 inauguration. For the millions of American small business owners who were concerned about compliance with yet another federal requirement, this announcement provides welcome relief and regulatory certainty.

“The law, which required mundane reporting, had turned into a complicated compliance web as judges and the government repeatedly paused and unpaused the measure from moving forward. If anything, the uncertainty regarding compliance has been a menace for business owners,” reported Inc.

The Treasury Department has indicated that this change aligns with the administration's broader agenda of reducing regulatory burdens on American businesses while still maintaining appropriate oversight of foreign entities operating within the United States.

We will continue to monitor developments related to the Corporate Transparency Act and provide updates as the Treasury Department issues its formal rulemaking to implement these changes.

For the latest updates on regulatory changes affecting your business, contact the B. Sloan Law office today.