The U.S. Treasury Department recently announced it will not enforce the Corporate Transparency Act (CTA) against domestic entities. This means that—at least for the timebeing—U.S.-based businesses are for all practical purposes relieved of their obligation to report beneficial ownership information to FinCEN by the March 21, 2025 deadline. Meanwhile, courts across the country continue to evaluate constitutional challenges to the law, including a recent decision in Michigan finding the CTA unconstitutional.

Treasury Department Suspends Enforcement for Domestic Entities

On March 2, 2025, the Treasury Department announced the effective suspension of the March 21, 2025 filing deadline for all domestic companies. This policy shift provides immediate relief to businesses that were preparing to comply with the CTA’s reporting requirements.

Treasury officials indicated they are preparing a proposed rulemaking that would narrow the scope of the CTA to apply only to “foreign reporting companies”—entities formed under foreign law that have registered to do business in the United States. 

This administrative pivot comes after months of legal battles across multiple federal courts, with conflicting rulings creating significant uncertainty for businesses nationwide. The proposed narrowing of scope, however, may face its own legal challenges, as it appears inconsistent with the text of the CTA itself, which explicitly covers both domestic and foreign entities.

Michigan Court Finds CTA Unconstitutional

On March 5, 2025, the U.S. District Court for the Western District of Michigan issued a notable ruling in Small Business Association of Michigan v. Yellen, finding that the CTA violates the Fourth Amendment’s protection against unreasonable searches. This is the first time a federal court has invalidated the CTA on Fourth Amendment grounds.

The Michigan court determined that business owners have a legitimate expectation of privacy in their beneficial ownership information. Judge Robert Jonker specifically criticized the CTA for creating what he called an “Orwellian ‘Big Brother'” database designed for law enforcement use and imposing massive compliance costs on small businesses (estimated at $21.7 billion nationally in the first year).

While this ruling technically applies only to the specific plaintiffs in that case, it represents an interesting legal precedent that may influence other courts considering similar challenges.

Moving Forward

The Treasury Department’s announcement provides significant relief from immediate compliance concerns. However, businesses should:

1. Monitor developments, as Treasury’s proposed rule has not yet been finalized
2. Be aware that Treasury still intends to enforce the CTA against foreign reporting companies
3. Maintain ownership records in case compliance becomes necessary later
4. Consult legal counsel if you have complex ownership structures or foreign connections

Our firm will continue to monitor these developments and provide updates as the situation evolves.