Trump’s Corporate Transparency Act Pivot Disrupts Suit, US Says

The US government’s decision to not enforce the Corporate Transparency Act against citizens or domestic companies should be fatal to a pending constitutional challenge against the law, it told the Fifth Circuit.

The Treasury Department will refrain from issuing penalties or fines against US citizens or the beneficial owners of domestic reporting companies and will issue a new beneficial ownership reporting rule that exempts US businesses from needing to make disclosures, Secretary Scott Bessent said in a March 2 announcement.

The policy change exempted millions of US businesses from needing to disclose their ownership before a March 21 deadline, which critics say gutted a law intended to crack down on financial crimes that use anonymous shell companies. The US Court of Appeals for the Fifth Circuit requested input over how the pivot would affect the government’s defense of the law, which had been challenged as unconstitutional.

“These regulatory developments deprive plaintiffs—who have not suggested that they own or represent any foreign reporting companies—of any basis for asserting irreparable harm,” the Justice Department said in a letter to the Fifth Circuit on Monday.

The US said its announcement didn’t render the case moot, however, because its interim rulemaking remains ongoing.

Firearms dealer Texas Top Cop Shop Inc., the National Federation of Independent Business, and the Libertarian Party of Mississippi together challenged the CTA as overreaching Congress’s enumerated powers, convincing a district court to preliminarily block the law nationwide. The Supreme Court lifted that injunction in January pending the government’s appeal defending the CTA, but on March 2, the Trump administration said it wouldn’t enforce the law’s disclosure requirements against US citizens or domestic businesses.

What remains of the CTA is demonstrably constitutional under Congress’s powers to regulate foreign commerce and oversee foreign affairs, the government’s supplemental brief said.

“There can be no serious dispute that Congress has the power to regulate foreign entities that have taken the affirmative step of registering to do business in the United States,” the government said.

The Fifth Circuit is scheduled to hear oral arguments in the case on April 1.

The Center for Individual Rights and Baker Hostetler LLP represent Texas Top Cop Shop.

The case is Texas Top Cop Shop, Inc. v. Bondi, 5th Cir., No. 40792, supplemental brief filed 3/17/25.