The Supreme Court on Thursday revived a requirement that owners of millions of small businesses register with an arm of the Treasury Department charged with fighting money laundering and other financial crimes.
The justices granted an emergency plea made by the Justice Department in the waning days of the Biden administration to allow enforcement of the Corporate Transparency Act, enacted in 2021 to crack down on the illicit use of anonymous shell companies.
Owners and part-owners of an estimated 32.6 million small businesses must register personal information with Treasury’s Financial Crimes Enforcement Network, or FinCEN. The information includes photo IDs and home addresses.
It’s unclear whether the Trump administration will devote much effort to enforcing the registration requirement, which has been opposed by Republican-led states and lawmakers, as well as conservative and business interest groups.
The registration requirement was blocked by a federal judge in Texas, who ruled that Congress lacked the authority to pass the corporate transparency law in the first place. It was kept on hold by a panel of the 5th U.S. Circuit Court of Appeals pending its review of the judge’s ruling.
The Supreme Court action allows enforcement of the registration requirement while the Texas case winds through the courts.
The National Small Business Association, which earlier challenged the reporting requirements in court, urged FinCEN to give businesses ample time to comply with the requirement.
“This decision creates even more uncertainty for the millions of small businesses we represent,” NSBA President and CEO Todd McCracken said. “I cannot stress enough what a major problem this back-and-forth is and the massive uncertainty it creates for the millions of small businesses across this country.”
He called on Congress to delay and repeal the act.
A beneficial owner is someone who owns at least 25% of the company or who has “substantial control” over it — meaning a senior officer, important decision-maker or someone who can appoint and remove officers. And up to 900,000 small and midsize businesses in Illinois may be impacted, Illinois Deputy Secretary of State Scott Burnham estimated last year.
As of Thursday evening, FinCEN said on its website that companies are not currently required to file beneficial ownership information and “are not subject to liability if they fail to do so while the [federal court] order remains in force” but that companies can voluntarily submit information.
The beneficial ownership information in the report is confidential, but there are some exceptions that allow disclosure. Certain federal, state, local, tribal and foreign officials will be able to request access for purposes related to national security, intelligence and law enforcement. They will be required to provide specific reasons for why the information is necessary and relevant. With the permission of a company, financial institutions also may be able to access the information with the aim of helping customers comply with certain requirements.
Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council, said the order likely isn’t the end of the “go-stop-go story” of the reporting requirement.
“At this point in time and with the cloud of uncertainty still hanging over CTA’s legality, we are urging President Trump to step in and provide immediate penalty relief for late filers, of which there are likely millions of small business owners,” she said. “The CTA confusion and chaos continues, and Congress really needs to step up and repeal the mandate.”
A coalition of labor, environmental and other progressive organizations that support the law praised the court for paving the way for its enforcement.
“For years, police and prosecutors have tried to combat a flood of dirty money associated with often violent crimes, but that can’t happen if they run into a wall of shell companies and secrecy,” Ian Gary, executive director of the FACT Coalition, said in a statement. “Today’s order is a reminder of the urgency of opening the money trail so our law enforcement officials can crack down on criminals who abuse the system.”
Contributing: Sun-Times