Client Alert: Eleventh Circuit Upholds the Corporate Transparency Act: A Major Appellate Endorsement of Beneficial Ownership Reporting
On December 16, 2025, the U.S. Court of Appeals for the Eleventh Circuit issued a unanimous decision upholding the constitutionality of the Corporate Transparency Act (“CTA”), reversing a lower court ruling that had invalidated the statute.[1] The decision represents a significant judicial endorsement of Congress’s effort to curb the use of anonymous companies in money laundering, sanctions evasion, and other forms of illicit finance.
While litigation over the CTA is ongoing in other jurisdictions, the Eleventh Circuit’s ruling materially strengthens the federal government’s position and signals increasing judicial acceptance of beneficial ownership reporting as a legitimate and necessary regulatory tool. However, given the Trump Administrations pullback from enforcement of most of the CTA’s registration requirements, its impact, at least for U.S. companies, remains muted.
Background: The Corporate Transparency Act
Enacted in 2021 as part of the National Defense Authorization Act, and going into effect as of January 1, 2024, the CTA requires certain U.S. and foreign entities registered to do business in the United States to report beneficial ownership information (“BOI”) to the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”).[2] The information is not to be made publicly available, but may be accessed by law enforcement, regulators, and—in limited circumstances—financial institutions conducting customer due diligence.
The CTA was designed to address what policymakers long described as a critical vulnerability in the U.S. financial system: the ability to form companies with little or no disclosure of the individuals who ultimately own or control them.
The Legal Challenge
In National Small Business United v. Yellen, a group of small business associations challenged the CTA in the Northern District of Alabama, arguing that Congress exceeded its constitutional authority by regulating corporate formation—an area traditionally governed by state law.[3] The plaintiffs also argued that the CTA exceeded Congress’s authority under the Commerce Clause and was not sufficiently related to a cognizable national security and foreign affairs issue to warrant federal intrusion into incorporation law—historically an exclusive area of state law. The district court agreed and enjoined enforcement of the CTA against the plaintiffs. The U.S. Department of Justice and the Treasury Department appealed.
The Eleventh Circuit unanimously reversed the district court, holding that the CTA falls squarely within Congress’s constitutional powers.
The court emphasized that the CTA regulates economic activity with a substantial connection to interstate commerce and does not federalize corporate formation, but instead imposes a limited, uniform reporting obligation aimed at a well-documented national and international security problem. The court reasoned that these reporting requirements constituted a reasonable exercise of Congress’s authority to regulate interstate commerce,
Broader Context and Policy Significance
The decision aligns with international pressure for robust BOI transparency regimes and responds to longstanding criticism that the United States lagged far behind peer jurisdictions.
Practical Implications: Shifting Executive Branch Priorities
The ruling increases the durability of the CTA, supports momentum for enforcement, and signals heightened scrutiny of opaque corporate structures. However, in March 2025, the Treasury Department announced that the Trump Administration would suspend enforcement of civil penalties against domestic reporting companies for non-compliance with the CTA’s BOI reporting requirements. The administration characterized the law, as originally enacted, as overly burdensome and intrusive for U.S. small businesses, and publicly endorsed regulatory actions aimed at limiting its reach. Treasury regulations issued during this period further narrowed the CTA’s practical application by effectively confining mandatory BOI reporting to foreign-formed entities registered to do business in the United States.
This divergence between judicial validation and executive enforcement policy underscores a key reality for companies and advisors: although the CTA has now received significant appellate confirmation of its constitutionality, its real-world impact will continue to be shaped by regulatory discretion, political priorities, and ongoing litigation. Entities operating in cross-border or higher-risk contexts should therefore expect beneficial ownership transparency to remain a central feature of U.S. financial crime policy, even as the contours of domestic enforcement continue to evolve.
[1] Nat'l Small Bus. United v. U.S. Dep't of the Treasury, No. 24-10736, 2025 WL 3637295 (11th Cir. Dec. 16, 2025).
[2] The CTA is codified at 31 U.S.C. § 5336.
[3] Nat'l Small Bus. United v. Yellen, 721 F. Supp. 3d 1260 (N.D. Ala. 2024).