Lengthy federal litigation has attempted to stop the implementation of various BOI requirements, with critics claiming they are overly burdensome, unconstitutional, and raise privacy and data security concerns. A 2024 federal district court decision initially blocked enforcement, but a 2025 US Supreme Court ruling (Texas Cop Shop v. Garland) allowed the law to go into effect. Subsequent congressional action urged FinCEN to exempt small businesses from having to file ownership information, resulting in FinCEN issuing an interim final rule that removed the requirement for all US companies and persons; instead, the rule focuses on foreign companies registered to do business in the United States. However, FinCEN has solicited public comments on the interim final rule and intends to issue a final rule soon.

Treasury Secretary Scott Bessent, using authority under the interim rule, has declared domestic collection of BOI from US persons and firms would not serve the public interest or provide useful information for national security, intelligence, or law enforcement efforts. Furthermore, under authority granted Treasury under the Bank Secrecy Act, FinCEN will exempt foreign reporting companies from having to report any US persons as beneficial owners, and US persons who are beneficial owners will not be required to report their BOI information to any foreign reporting company. According to a projection in the interim final rule, FinCEN expects approximately 12,000 foreign companies to submit BOI reports, which is down drastically from the nearly 32 million reporting companies that were initially covered in the original BOI reporting rule.

Why the BOI Exemption?

BOI reporting requirements have been highly controversial from the initial proposal of CTA legislation in Congress. From a regulatory cost perspective, FinCEN, under requirements set forth in the Paperwork Reduction Act, estimated that “the total cost in Year 1 of initial BOI reports is $21.7 billion, and … the total cost of initial BOI reports annually in Year 2 and onwards is $3.3 billion.” Noteworthy for small business, the FinCEN analysis concluded “that this final rule will have a significant impact on a substantial number of small entities.” Regulatory compliance costs are an issue that certainly caught the attention of US business associations, especially the National Federation of Independent Business (NFIB).

The NFIB, the nation’s largest business association representing American small businesses, has been lobbying against the BOI reporting mandate since the legislation was initially proposed in Congress six years ago. NFIB leadership argues that the mandate is invasive and unnecessary and jeopardizes 32 million American small business owners who face up to two years in prison and $10,000 in fines if they do not comply with the law. Specifically, regardless of the “good intentions” of the CTA, the NFIB argues that there is no need for American businesses to bear the cost of handing over more of their personal data to the federal government, as most if not all these data are found in existing reports for federal, state, and local agencies. Furthermore, the new BOI database created by the CTA would allow federal regulatory agencies and thousands of law enforcement officers to access it without acquiring a subpoena or warrant, which raises privacy and constitutional litigation issues.

Is BOI De Facto Eliminated?

While the Trump administration has announced that it will not enforce the BOI reporting requirements on US owners (including for those US persons who presently have FinCEN identifiers, as the interim final rule does not relieve US persons from the requirements related to FinCEN identifiers), the requirement will still legally exist for some future administration to enforce. Moreover, like any other rulemaking of the federal government, the interim final rule—or the final rule—may be challenged in court under the Administrative Procedure Act by a plaintiff having standing, such as, for example, a foreign reporting company arguing that it was placed at a competitive disadvantage by being required to report to FinCEN while other entities do not face that burden.

The original purpose of the CTA is laudable from a public policy perspective: to help in the international fight against serious crimes. To that end, the US government is under international scrutiny—from international crime prevention organizations it participates in, including the global Financial Action Task Force (FATF)—to adopt more comprehensive rules for capturing important financial data of corporate and business entities operating in the United States. Other nations that participate in the FATF maintain corporate and business owner information databases similar to the BOI, and US law enforcement and intelligence agencies currently have access to them. These agencies do not want to risk losing access to valuable financial data.

Policy Alternatives

There is a dilemma here for the US government. On one hand, the previous FinCEN reporting requirements under the Biden administration were overbroad in their required information reporting by their inclusion of a wide scope of entities that were unlikely to be involved in financial criminal activities. Further, the Treasury Department already has access to data such as income tax filings. On the other hand, Treasury may now have gone too far in the opposite direction. There is ample evidence that domestic entities of various forms and size are widely utilized for money laundering and other illegal activities. The FATF participation requirements are important to maintain for US law enforcement and intelligence agencies’ investigation and enforcement activities.

Should—or can—Congress repeal the CTA and BOI reporting requirements permanently? Or is there a “middle ground” where Congress can modify the CTA to maintain this important FATF participation?

The better alternative is to address the latter question, where the Treasury Department utilizes its tax filings to develop a BOI database. Further information collection would be necessary, but using existing data would significantly reduce the regulatory costs for American firms (especially small businesses) and individuals to only costs associated with information unavailable through Treasury or other federal government sources. The same would go for reforming the threat of exiting onerous fines and jail time in the CTA and replacing them with more modest (and reasonable) financial penalties for non-compliance concerning important information not readily available through other government sources.

It would also be helpful to exempt specific types of small businesses or organizations that are highly unlikely to be used as conduits for illicit activities. Congress should also restrict access to BOI information to only those domestic and foreign criminal and intelligence agencies showing convincing “just cause” for such access, interpreted through a clearly developed administrative rubric granting such access (including, if warranted in certain questionable instances, a subpoena).

One thing is clear: There are ample policy alternatives for Congress to consider to make the CTA both effective as a valuable tool for law enforcement purposes while still being cost efficient for the American small business community.