The case

On 21 March, the Treasury Department issued a new interim administrative rule for the Corporate Transparency Act (CTA), eliminating disclosure requirements for both any US Reporting Companies and any US beneficial owners of non-US Reporting Companies. The few remaining entities covered by the CTA – non-US Reporting Companies with one or more non-US Beneficial Owners – have thirty days to submit any Beneficial Owner Information (BOI) that was originally due by 1 January 2025, but was not yet disclosed.

Source: Paul Foster Millen; Millen Tax & Legal GmbH

The commentary

For this new administrative rule, FinCEN and the Secretary of the Treasury relied on a provision in the CTA statute, which grants authority to the executive branch to exempt entities or groups of entities from the CTA’s disclosure obligations (31 USC 5336(a)(11)(B)(xxiv)). However, that statutory authority is restricted to situations where the disclosures under the CTA statute both “would not serve the public interest” and “would not be highly useful in national security, intelligence, and law enforcement agency efforts to detect, prevent, or prosecute money laundering, the financing of terrorism, proliferation finance, serious tax fraud, or other crimes.” (Id.) This particular administrative rule though stems from the executive branch’s unilateral determination that well over 99% of the entities covered in the statute as written no longer pose the risk that Congress identified only a few years ago. It is highly unlikely that the executive enjoys such latitude in interpretation (Loper Bright Enterprises v. Raimondo, 603 U.S. 369). Despite likely success on the merits, there is a standing obstacle. The injured party in this case is the enacter of the law. Presently, however, Congress is more committed to revoking the CTA than enforcing it. Further, it is not likely that another third party, like a pro-transparency organisation, could assert a right to bring the suit in court. However, a future Congress will retain the right to challenge this rule change in the courts and thus you may not have read the last blog on the CTA.