Treasury Department to Limit Enforcement of Corporate Transparency Act

The Treasury Department said Sunday (March 2) that it will not enforce the Corporate Transparency Act’s penalties and fines associated with the beneficial ownership information reporting rule.

It will not do so under the existing regulatory deadlines and will not enforce penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after forthcoming rule changes take effect, according to a Sunday press release.

The Treasury Department plans to issue a proposed rulemaking that would narrow the rule’s scope to foreign reporting companies only, the release said.

“This is a victory for common sense,” U.S. Secretary of the Treasury Scott Bessent said in the release. “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.”

The Corporate Transparency Act, which was passed in 2021 to help track illicit money, requires 32 million small businesses to file beneficial ownership information with the Financial Crimes Enforcement Network (FinCEN) or face the possibility of penalties.

The act and its beneficial ownership reporting requirements faced a legal battle that reached the Supreme Court in January after the Department of Justice filed an application on behalf of FinCEN to stay a national injunction that was issued by a Texas district judge in December and paused implementation of the act.

Opponents said the requirements were needlessly complex, while supporters said the rules help crack down on financial crime.

FinCEN said Dec. 27 that it was giving many small businesses more time to file beneficial ownership information amid the ongoing legal battle.

It was reported Dec. 9 that as of Dec. 1, about 30% of small businesses had filed beneficial ownership information to FinCEN. At that time, about 32.6 million businesses were required to submit an initial beneficial ownership information report by Jan. 1.

The runway had been cleared on Feb. 18 for FinCEN to start enforcing the Corporate Transparency Act, PYMNTS reported at the time.

The enforcement was set to bring heightened scrutiny and make know your business (KYB) and supplier risk increasingly critical issues.

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