In a major reversal, the U.S. Court of Appeals for the 11th Circuit has upheld the constitutionality of the Corporate Transparency Act (CTA), finding it to be a valid exercise of congressional power. However, the practical effect of the decision may be limited, given a March 2025 Treasury interim final rule exempting “domestic reporting companies” and their beneficial owners from the law’s reporting requirements. (Nat’l Small Bus. United v. U.S. Dep’t of the Treasury, No. 24-10736, 2025 WL 3637295 (11th Cir. Dec. 16, 2025))
The CTA was signed into law in 2021 and takes aim at layered corporate structures that facilitate illicit activities, such as money laundering, fraud, and trafficking. However, the CTA and its implementing beneficial ownership information (BOI) reporting regulations have faced constitutional challenges in several jurisdictions. Tuesday’s decision out of the 11th Circuit may be a win for those seeking to uphold the law, but it doesn’t reinstate the broader BOI reporting requirements.
Eleventh Circuit Decision
The case was brought by the National Small Business United and its member Isaac Winkles, who argued that the CTA was unconstitutional. In 2024, the U.S. District Court for the Northern District of Alabama agreed with the plaintiffs, ruling that the Congress exceeded its authority in passing the CTA by regulating the “non-commercial act of incorporation,” which the district court viewed as a purely local activity. The government appealed that decision to the 11th Circuit.
Writing for the 11th Circuit in a December 16 opinion, Judge Andrew Brasher stated that the district court, which had previously found the law unconstitutional, was incorrect. Brasher – a Trump appointee – continued that the CTA is a constitutional exercise of Congress’ power under the Commerce Clause. The CTA regulates activity that is economic in nature – specifically, the ownership and maintenance of corporate entities, he explained. “These entities are commercial by their very nature,” reads the opinion. “As the Supreme Court has long recognized, a corporation is never created ‘for its own sake,’ but instead exists ‘for the purpose of effecting something else.'”
Brasher adds that “to the extent a corporate entity is not involved in commerce,” carve-outs within the law for “trusts, banks, government agencies, public utilities, political organizations, and nonprofits” as well as “inactive business” sufficiently tailor requirements.
And Congress has a rational basis to conclude that anonymous corporate dealings have a substantial aggregate effect on interstate commerce, writes Brasher. “Congress relied on input from numerous national security and law enforcement experts about how anonymous shell companies affect interstate and international commerce,” reads the opinion.
The court also rejected the plaintiffs’ argument that the CTA violated the Fourth Amendment’s prohibition on unreasonable searches. It found the reporting requirement to be “uniform and limited.”
Narrowed Reporting Scope
The government’s victory in court may have limited impact, however, in light of a Treasury interim final rule issued in March. That rule fundamentally changed the BOI reporting requirements by limiting reporting to “foreign entities.” It also exempted from reporting requirements U.S. persons who are beneficial owners of foreign entities.
Under the new, narrower rule, the BOI reporting requirement only applies to foreign-owned entities. Specifically, foreign companies that are registered to do business in the United States must still file BOI reports with FinCEN.
According to a March 21 announcement by Treasury’s Financial Crimes Enforcement Network (FinCEN), the interim final rule was slated to be finalized this year.
Takeaways
Transparency International’s Scott Greytak called the 11th Circuit decision “a clear wake-up call” for Treasury. “With the law’s constitutionality now upheld at the appellate level, the Department’s choice to exempt over 99 percent of companies Congress sought to cover is a policy choice – not a legal necessity,” he added.
Zorka Milin, a policy director at the FACT Coalition, told Checkpoint that the 11th Circuit decision “doesn’t directly change the Treasury’s rule implementing the CTA.” But she added that “it does resoundingly validate the CTA as originally enacted by Congress.” She hopes that as Treasury finalizes the reporting rule, it will “take into account Congressional intent and reverse its unlawful and unconstitutional IFR from March.”
In September, a group of Democrat lawmakers pushed Treasury Secretary Scott Bessent on the administration’s about-face on BOI reporting under the interim final rule. Among the lawmakers’ questions were whether Bessent and Treasury “disagree with national security and law enforcement officials across Republican and Democratic administrations who emphasized that centralized beneficial ownership information reporting would assist law enforcement and protect our national security.”
Take your tax and accounting research to the next level with Checkpoint Edge and CoCounsel. Get instant access to AI-assisted research, expert-approved answers, and cutting-edge tools like Advisory Maps and State Charts. Try it today and transform the way you work! Subscribe now and discover a smarter way to find answers.
