The future of the Corporate Transparency Act (CTA) remains uncertain, as legal battles and political challenges continue to delay its enforcement. While the Supreme Court recently lifted an injunction blocking the law, a separate nationwide injunction has kept the CTA on hold, leaving millions of small business owners in regulatory limbo.
Enacted in 2021, the CTA requires small business owners and part-owners to disclose sensitive personal information—such as photo IDs and home addresses—to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The law aims to combat money laundering and illicit financial activities by targeting anonymous shell companies. If enforced, the CTA would impact an estimated 32.6 million small businesses across the United States.
However, the law has faced significant pushback from small business advocacy groups, who argue that it imposes unnecessary burdens and privacy risks on small business owners. The ongoing legal challenges have only intensified the confusion around compliance and enforcement.
The Supreme Court’s decision and its implications
On January 23, 2025, the Supreme Court lifted a December 2024 injunction that had blocked enforcement of the CTA. This decision temporarily reinstates the law’s beneficial ownership reporting requirements, a key component of the CTA. However, enforcement remains suspended due to a separate nationwide injunction issued on January 7, 2025, in Smith v. Treasury. This second injunction has left reporting obligations on hold, though businesses may voluntarily comply with the law during this period.
The legal back-and-forth highlights the CTA’s precarious position. Proponents of the law see it as a vital tool to curb financial crime, while opponents, including small business advocacy groups, argue it creates unnecessary regulatory burdens and privacy risks for small business owners.
Legal and political challenges
The CTA has faced numerous legal challenges since its inception. In late 2024, a Texas judge ruled that Congress lacked the authority to pass the law, leading to a nationwide injunction. The Supreme Court’s decision to lift this injunction addressed one aspect of the CTA—beneficial ownership reporting—but did not resolve other pending legal disputes.
The ongoing case, Smith v. Treasury, has further complicated the situation. This case resulted in a separate injunction blocking the enforcement of the CTA’s reporting requirements, leaving small business owners in a state of uncertainty. FinCEN has updated its website to clarify that businesses are not currently required to report under the Smith injunction, but the risk of future enforcement remains.
Additionally, the CTA faces political opposition. Several bills seeking to repeal the law have been introduced in Congress, though their likelihood of success is unclear. Meanwhile, the Trump administration’s stance on defending the CTA could further shape its future.
Impact on small business owners
For small business owners, the CTA’s requirements represent a significant challenge. The law mandates the disclosure of personal information, which many view as a violation of privacy. Advocacy groups, such as the National Small Business Association (NSBA) and the Small Business & Entrepreneurship Council, have called for Congress to delay or repeal the law, citing the confusion caused by its uncertain enforcement.
Todd McCracken, President and CEO of the NSBA, emphasized the chaos the CTA has created, urging lawmakers to provide relief for small businesses. Similarly, Karen Kerrigan, President and CEO of the Small Business & Entrepreneurship Council, highlighted the law’s potential to disrupt business operations if deadlines are missed due to legal uncertainty.
What lies ahead for the CTA?
The CTA’s future remains uncertain as legal battles continue to unfold. A three-judge panel from the Fifth Circuit Court of Appeals is set to hear oral arguments on the law’s constitutionality in March 2025, and several other challenges are pending. In the meantime, small business owners must navigate the complexities of compliance while staying alert to potential regulatory changes.
For now, the CTA remains a contentious issue, dividing proponents who prioritize combating financial crime and opponents who advocate for small business interests. As court decisions and legislative actions shape the law’s trajectory, small business owners must remain informed and prepared for possible changes to their reporting obligations.
