Treasury Kills Enforcement Of Beneficial Ownership Reporting - Small Businesses Rejoice

The Trump administration has freed millions of businesses from a red-tape chore concocted primarily by Democrats: On Sunday, the Treasury Department announced it would not enforce a rule requiring businesses to file beneficial ownership reports with an obscure federal agency. The move came only a day after Elon Musk responded to an X user's plea for intervention on the issue, replying, "I can look into it."   

Intended to thwart money-laundering and other financial crimes facilitated by shell companies, the beneficial ownership information (BOI) rule would have put the ownership information of more than 32 million entities in a US Treasury database, with no exemption for even the smallest. Business owners were supposed to report each beneficial owner's name, birthdate and address to the Financial Crimes Enforcement Network (FinCEN) -- and upload an image of a drivers license, passport or other acceptable form of identification.  

NPR)

Now, however, the Treasury says it will not enforce the rule, and will issue a proposed rule-making that would confine the rule's scope to foreign reporting companies. “This is a victory for common sense,” said Treasury Secretary Scott Bessent.  “Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy.” 

Sunday's Treasury announcement came just a day after comedian and conservative influencer Terrence K. Williams used X to beg Elon Musk to intervene and help kill the rule. "I can look into it," Musk replied. 

The BOI rule, which sprang from 2019's Corporate Transparency Act (CTA), was already in some jeopardy. As the Jan 1, 2025 deadline loomed, a federal judge in December issued a nationwide injunction barring its enforcement, based on the substantial likelihood the rule would be found unconstitutional; corporate regulation is traditionally a matter for the individual states. 

The Wall Street Journal called the Treasury move only a "half-victory for small business": As long as it remains law under the CTA, the requirement could conceivably spring back to life under a future Democratic administration, provided the courts don't put a dagger in it. "Instead of relying on the unknown outcome of litigation, Republicans can use their majorities in Congress to repeal this needless burden on small business," wrote the Journal's editorial board.

The rule was poorly-publicized, exposing small business owners to onerous penalties for a duty most didn't even know they had. Punishment for noncompliance would have ranged from civil fines of up to $591 a day to criminal consequences of up to $250,000 and a five-year prison term. Compliance would have had its own costs: FinCEN itself estimated that compliance would cost $22.7 billion in the first year alone, and then $5.6 billion in subsequent years into perpetuity. 

Supporters of the rule condemned Treasury's announcement, and predicted the end-run around a provision of the CTA won't stand.  “Hollowing out the Corporate Transparency Act is an unconstitutional subversion of Congress’ intent that will not survive judicial scrutiny," said Ian Gary, executive director of the FACT Coalition. 

President Trump heralded the nixing of the requirement. “This Biden rule has been an absolute disaster for Small Businesses Nationwide,” he said on Truth Social. “The economic menace of BOI reporting will soon be no more.”