The House Committee on Financial Services voted 26-25 on April 21 to advance legislation that would limit Corporate Transparency Act (CTA) reporting requirements to foreign entities and beneficial owners. The vote came after a heated debate over whether the law correctly balances small business regulatory burdens with law enforcement’s need for information about shell companies.
The CTA, enacted in 2021 as part of an anti-money laundering law, requires millions of small businesses to report information about their beneficial owners — the people who own or control them — to Treasury’s Financial Crimes Enforcement Network (FinCEN). The CTA has been challenged in multiple courts on constitutional grounds, with varying success. However, in March 2025, FinCEN paused enforcement of the reporting requirements for domestic entities and beneficial owners — who comprise the vast majority of those subject to the law — via an interim final rule.
But CTA opponents remain concerned about a pivot in enforcement under a later administration. “As it currently stands, the CTA remains the law of the land,” explained the National Small Business Association, one group that has challenged the law in court. The group says a future regulatory change could place small businesses “back in Treasury’s crosshairs.” NSBA is seeking U.S. Supreme Court review of a decision upholding the CTA.
The bill, the Repealing Big Brother Overreach Act, H.R. 425, as amended by the committee, would permanently prevent future administrations from enforcing the reporting requirements against U.S.-formed companies and U.S. beneficial owners. According to Transparency International, the change would exempt over 99.9% of entities that were initially subject to the CTA’s reporting requirements.
Focus on Small Business Burden
Supporters of the bill argued that the CTA imposes an unfair and duplicative burden on law-abiding small business owners. The bill’s sponsor, Representative Warren Davidson (R-OH), said the reporting requirements presume small businesses have “committed a crime” by requiring them to report sensitive information to FinCEN.
“They’re essentially being served a search warrant,” Davidson contended. “They’re going to report to an agency they’ve never heard of,” he added, referencing the small business community’s lack of familiarity with FinCEN.
Davidson also took issue with the utility of requiring beneficial ownership information reports. “The fallacy is that if you just fill out a piece of paper, that everything would be discernible,” he said.
Other proponents of the bill argued the CTA’s requirements are redundant. Committee Chair French Hill (R-AR) noted that banks are already required to collect beneficial ownership information from their clients under the 2016 Customer Due Diligence (CDD) rule. “It’s already the law to disclose beneficial ownership, and it is collected by every financial institution,” Hill explained.
Hill added that the CTA subjects millions of entrepreneurs, including plumbers, electricians, and other small business owners, to a “confusing” filing requirement with the threat of criminal prosecution for errors.
Opponents Warn of National Security Risks
Democrats, however, strongly opposed the bill, warning that it would gut one of the most significant national security tools created in recent years. Ranking Member Maxine Waters (D-CA) argued the vote would “protect terrorists, drug traffickers, gun smugglers” by allowing them to use anonymous shell companies to hide illicit funds.
And the CTA is supported by law enforcement organizations, including the National Association of District Attorneys and the National Association of Assistant United States Attorneys, said Representative Stephen Lynch (D-MA). “Narrowing the Corporate Transparency Act will have devastating consequences on law enforcement’s ability to fight criminal enterprises that exploit shell companies to launder money to traffic drugs,” he added.
CTA supporters also contend the compliance burden is minimal. “It’s a form that takes about 10 minutes to fill out,” said Lynch. “You’ve got to fill out who you are — your name, basically — and any doing business as, any other affiliates,” he explained. Beyond that, Lynch said beneficial owners need to provide their tax ID number and their real ID.
Anti-Corruption Experts Condemn Vote
Financial transparency advocates condemned the committee’s action. The Financial Accountability and Corporate Transparency (FACT) Coalition’s Erica Hanichak called the bill a “gift to the fentanyl traffickers, fraudsters, and U.S. adversaries that rely on the anonymity that shell companies provide.” She argued that “Congress should be moving to strengthen this critical anti-money laundering law, not tear it down.”
The vote “ignores clear warnings from American national security and law enforcement officials,” according to Transparency International’s Gary Kalman. The bill “risks turning the United States back into a place where criminals and foreign adversaries can more easily fund their networks and hide dirty money in plain sight,” he added.
“After 30 years investigating international corruption and recovering over $1 billion in stolen assets, I’ve seen firsthand how anonymous U.S. shell companies are used by kleptocrats, foreign officials, and cartels to launder illicit funds and purchase luxury assets in this country,” said former FBI official Debra LaPrevotte. She described the CTA as “a key tool needed by law enforcement to follow the money and stop the United States from being a safe haven for criminal proceeds.”
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