The back and forth volleying over the Corporate Transparency Act took a new turn late on March 2, when the U.S. Treasury Department announced that it would not enforce the law against American citizens and domestic reporting companies. The Department further announced that it will propose a rulemaking to narrow the application of the law exclusively to foreign-registered companies. President Donald Trump celebrated the news in a post on Truth Social, declaring: “The economic menace of [beneficial ownership information] reporting will soon be no more.”

The CTA mandates that “reporting companies” – corporations, limited liability companies (LLCs), and other entities authorized to do business in the U.S. – file sensitive beneficial ownership information (BOI) reports with the Financial Crimes Enforcement Network (FinCEN). This includes the names, birthdates, residential addresses, and identifying documents (such as photocopies of passports or driver’s licenses) of individuals who either own or control at least 25 percent of a reporting company or exert substantial control over its operations.

People United for Privacy Foundation recently warned of the dangers the Corporate Transparency Act (CTA) poses to free speech and personal privacy. In a report co-authored with Tyler Martinez of the National Taxpayers Union Foundation, we found that the Corporate Transparency Act is an end-around for donor privacy because it requires reporting companies, like LLCs, that are used as philanthropic vehicles to disclose their owners. Furthermore, the law creates a government database warehousing sensitive personal information. In essence, in an attempt to curb illicit activity by a small subset of corporations, the Corporate Transparency Act assumes that all corporations are being abused for nefarious purposes.

In an op-ed in The Washington Times, we elaborate on the law’s vulnerabilities:

“From OPM to the IRS, millions of Americans have been victimized by hacks, leaks, and accidental disclosures of data that receive greater protections than the CTA affords. The CTA’s database of small business owners will make for an especially juicy target.

The sheer number of people who will have access to the database is itself a privacy concern. In recent years, the IRS has worked to improve data security by reducing the amount of donor information it collects yearly. The CTA moves decisively in the opposite direction. The law is designed for sharing, not security. It embodies the ambitious anti-privacy agenda of politicians like Rhode Island Senator Sheldon Whitehouse, who have long sought to unmask nonprofit donors.”

While the narrowing of the law is welcome, much work remains. For one, many Americans have already submitted their BOI in compliance with the law. Further, the law is still subject to several lawsuits, some of which argue that the law’s disclosure regime violates the First Amendment. Lastly, as long as the law remains on the books, it could be revived by a future presidential administration to impose more onerous reporting requirements on a broader class of corporations. Overturning the law completely will ultimately require a ruling by the U.S. Supreme Court in one of the pending legal challenges or congressional legislation.

Until the law is struck down or repealed, however, the latest development from the Treasury Department is a significant victory in protecting Americans’ free speech rights.