This month, key decision-makers—the Supreme Court, the Trump administration, and a Republican-led Congress—will determine the future of the Corporate Transparency Act (CTA). Enacted under the Biden administration, the CTA imposes onerous reporting requirements on millions of small businesses and nonprofits. It represents a clear case of regulatory overreach that must be rejected by conservative leaders and overturned by the Court as patently unconstitutional.
Congress passed the CTA with the ostensible aim to combat terrorism and criminal organizations by going after shell companies used to launder money. The law requires small businesses to file what is called a beneficial ownership information report to identify the people behind the company.
Yet the CTA is far more than a crime-fighting measure: It is a sweeping, unconstitutional mandate that threatens millions of small business owners and nonprofits with onerous reporting requirements and the specter of criminal penalties—all for simply existing. By stretching the Commerce Clause to impose invasive burdens on 33 million small entities (both businesses and nonprofits), Congress has flagrantly overstepped its authority, in defiance of Supreme Court precedent that rejects regulation based solely on existence. Although the law is currently on hold, that pause could soon vanish—plunging businesses into a state of regulatory uncertainty.
If the courts permit the CTA to take effect, any entity that fails to comply will face criminal penalties and a $500 per day fine for every day a report is late, incomplete, or inaccurate. According to the National Small Business Association, the average small business owner will spend nearly $8,000 to comply with these new reporting requirements in the first year alone.
Moreover, the CTA compels nearly every corporation or limited liability company to disclose sensitive personal details of beneficial owners—including names, addresses, dates of birth, and copies of passports or driver’s licenses. The government would funnel information into a database accessible by law enforcement without proper judicial oversight. Such a mandate not only violates Fourth Amendment protections against warrantless searches but also chills free association— reminiscent of the government abuses condemned in NAACP v. Alabama.
What makes this act even more egregious is its arbitrary scope: the burden has fallen squarely on small businesses and nonprofits.
“The act was pitched as a way of countering financial crimes by disclosing the identities of corporate decision-makers, but lobbyists for 23 categories of corporate entities secured statutory exemptions, including those most likely to be involved in financial crimes—banks and financial services, publicly traded corporations, and large closely held corporations,” according to an analysis of the legislation by the Center for Individual Rights, a public interest law firm that has fought the law’s regulations in court. “Unfortunately, that leaves mostly small businesses and some nonprofits to comply or suffer criminal liability.”
This selective targeting not only upends the principles of competitive federalism but also transforms everyday entrepreneurs into potential criminals for mere administrative oversights.
Even the government’s own actions betray its lack of genuine urgency. Four years after Congress enacted the CTA, the Treasury Department has repeatedly delayed its implementation, and a recent appeal in the Fifth Circuit Court of Appeals underscores that the alleged irreparable harm to the government by suspending the law’s enforcement is vastly overstated. The federal government has plenty of other tools in its arsenal to fight money laundering without this indiscriminate small business dragnet.
Congress itself recently recognized the problematic nature of this law. Earlier this month the House unanimously passed the Protect Small Business from Excessive Paperwork Act, introduced by Rep. Zach Nunn, R-Iowa. The one-sentence bill postpones the beneficial ownership information reporting deadline to Jan. 1, 2026. A similar measure is advancing in the Senate. Rep. Nunn explained that many business owners are unaware of FinCEN, often dismissing its notices as scams from a fictitious agency.
Another bill advancing in Congress, the Repealing Big Brother Overreach Act, aims to permanently eliminate the Corporate Transparency Act and its burdensome reporting requirements.
Filings in a case challenging the law at the Supreme Court are due Friday. The Court should act to prevent the enforcement of this invasive law that violates the Constitution, disrupts the livelihoods of millions, and further consolidates federal power over areas that have long been reserved for state governance.
