Oregon Plaintiffs Oppose ‘Stay’ in Corporate Transparency Act Case

As the Trump administration’s Treasury seeks to pause litigation challenging the Corporate Transparency Act’s beneficial ownership information reporting requirements, one set of plaintiffs is pushing back.

Under the CTA, certain entities — including small businesses — were required to report their beneficial ownership information to Treasury’s Financial Crimes Enforcement Network (FinCEN). However, several cases challenged the reporting requirements as unconstitutional — leading to a pause in the reporting deadline.

Then in March, Treasury announced that it would not be enforcing the reporting requirements against domestic entities. It issued an interim rule to that effect and announced plans to finalize the change later this year.

The enforcement pivot “is expected to reduce the total number of reporting companies from more than 32 million to just 11,667,” said the FACT Coalition.

The change also left in question the fate of cases pending around the country — including in the 4th, 5th, 9th, and 11th Circuit Courts of Appeal — that challenged the previous, broader reporting rule.

Treasury most recently has moved to hold proceedings in some of those cases in abeyance, arguing that the plaintiffs’ claims may be mooted by a final rule. And plaintiffs who are U.S. citizens or domestic entities face no risk of imminent harm, says Treasury, because it will not be enforcing penalties associated with the reporting rule against them.

Firestone plaintiffs push back.

Dawn M. Bauman, chief strategy officer for the lead plaintiff in the 4th Circuit case, Community Associations Institute, told Checkpoint that the group does not intend to oppose the government’s motion to hold the case in abeyance. But the plaintiffs in the 9th Circuit case, Firestone v. Bessent, are taking a different approach.

In Firestone, seven Oregon small business owners contend the CTA exceeds Congress’ enumerated powers. “[T]he federal government lacks the power to regulate entities organized under state law merely because they have registered with their home state,” say the plaintiffs.

The Firestone plaintiffs also bring 1st and 4th Amendment claims, arguing that the CTA and its implementing rules restrict their associational rights and require “invasive disclosures on pain of criminal punishment.” The Oregon federal district court denied the plaintiffs’ request for a preliminary injunction in September 2024 — and the plaintiffs appealed to the 9th Circuit.

After the government moved to hold their case in abeyance, the Firestone plaintiffs filed an April 23 response in opposition. The group of small business owners argue that “[w]hile using the term ‘abeyance,’ the government is, in reality, seeking an indefinite stay … with the explicit goal of strategically mooting Plaintiffs’ challenge to a statute.”

For a stay to be granted, the Firestone plaintiffs say, three factors must be considered: possible damage from a stay, hardship or inequity suffered if the case moves forward, and “the orderly course of justice.” Not only does the government fail to meet this burden, the plaintiffs contend, it never even acknowledges it in its motion.

Beyond that, the Firestone plaintiffs say the interim rule exempting them from the CTA’s reporting requirements “merely delays, rather than eliminates, domestic enforcement of the CTA.” With the government soliciting comments on a rule change, the plaintiffs are wary of another enforcement about-face.

“The possibility of eventual mootness is simply an insufficient reason to delay review, especially when future events are uncertain,” the Firestone plaintiffs contend. To them, the government’s current hope that their case may become moot is an insufficient reason for a litigation pause.

Unpacking the discrepancy.

Why the differing response by Community Associations Institute and the Firestone plaintiffs?

“Some parties are happy to take Treasury and FinCEN at their word that they will not enforce the CTA’s reporting obligations on ‘domestic reporting companies’ or on U.S. persons,” Polsinelli attorney Bill Quick told Checkpoint.

But Treasury’s position is “contrary to the express text of the CTA, which remains the law of the land,” Quick explained. “This leaves the current situation vulnerable to being challenged and overturned in the near term, or possibly reversed by a future administration, each with retroactive effect.”

For this reason, said Quick, some plaintiffs, such as those in Firestone, “are wanting to definitively kill the CTA now, so they won’t need to deal with it again later.

According to Kostelanetz Partner Melissa Wiley “the interim final rule is just that: an interim rule, and one that can be changed at any point in time, so long as it is consistent with the (broad) language of the statute and is promulgated consistent with the Administrative Procedures Act.”

However, the Firestone plaintiffs are challenging the statute itself. “If you believe there’s a defect in the statute, there’s always going to be a risk that it could be applied unconstitutionally in the future, even if the present enforcement is in line with what the plaintiffs believe is permissible,” Wiley told Checkpoint.

But the Firestone plaintiffs differ from those in Community Associations Institute v. Treasury. CAI — which represents condominium associations, homeowners associations, and housing cooperatives — had sought a narrow exemption from the CTA’s reporting requirements for its members.

It argues that community associations are composed of “unpaid, volunteer board members” and present “virtually no risk of financial crime.” And as tax-exempt nonprofit organizations, community associations already must comply with “state-mandated transparency and accountability practices.”

Twenty-four types of entities are currently exempt from reporting requirements under the CTA, including nonprofit organizations “described in section 501(c) of the Internal Revenue Code” and “exempt from tax under section 501(a) of such Code.”

FinCEN, under the Biden administration, rejected CAI’s request that this “nonprofit exemption” be interpreted to include its members.

According to Quick, CAI may be optimistic that a Trump administration Treasury will take a different approach, allowing its members to fall under the nonprofit exemption. And Bauman indicated CAI was still pushing for the exemption in light of “the unique, non-business nature of community associations.”

Exempting the Firestone plaintiffs — small business owners in a wide swath of sectors — will be a bigger lift, however.

Treasury can only provide exemptions beyond those enumerated in the CTA statute where requiring reporting “would not serve the public interest” and “would not be highly useful in national security, intelligence, and law enforcement agency efforts.” And such exemptions require concurrence of the Department of Homeland Security and Attorney General.

In addition, to Wiley, CAI’s stance “could be focused on practical considerations.” They may “feel comfortable enough with the current interim final rule (and believe that the final rule will be consistent enough with the interim one) that they don’t feel the need to continue to spend time and money on fighting the constitutionality of the law.”