What is the Corporate Transparency Act, and Why Does it Matter?
The Corporate Transparency Act (CTA) was passed to combat money laundering and improve national security by requiring businesses to report detailed information about their ownership structure to the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). While the goal is commendable, the law, if fully enacted, will impose significant burdens on small businesses – particularly those without dedicated compliance resources.
The CTA requires most small businesses to file reports disclosing their beneficial owners and other private details, with steep fines and potential criminal penalties for mistakes or failure to comply. For lighting manufacturers, retailers, and distributors, this means shifting focus and resources away from operations and growth to meet new administrative demands. Thankfully, there are encouraging signs that relief may be on the way, as both Congress and the courts take steps to address these challenges. Currently, according to the FinCen website, businesses are still not required to file these reports. The most recent developments regarding the Corporate Transparency Act are below.
House Passes Bill to Delay Reporting Deadline
In a key victory, the House of Representatives unanimously passed the Protect Small Businesses from Excessive Paperwork Act of 2025 (H.R. 736), which aims to push back the reporting deadline for businesses formed before 2024. The strong bipartisan support for the bill reflects growing recognition of the CTA’s challenges.
The bill now heads to the Senate, where we are optimistic it will receive favorable consideration. If passed, this legislation will give businesses more time to adjust and comply with any future reporting requirements.
Smith Ruling Appeal Underway
On Feb. 5, the Department of Justice (DOJ) filed an appeal of the district court’s ruling in Smith v. Treasury, which had temporarily paused the CTA’s reporting requirements. The government also asked the appellate court to lift the injunction, meaning the reporting requirements could resume if the courts agree.
For now, the pause remains in effect, providing businesses with much-needed breathing room. We are closely watching this case, and there is hope that the courts may continue to side with small businesses or even elevate the case to the Supreme Court.
FinCEN Offers Grace Period and Promises Relief
FinCEN announced that if the courts reinstate the CTA reporting requirement, businesses will be granted a 30-day grace period to comply. Treasury signaled that it may adopt a risk-based enforcement approach, focusing primarily on high-risk entities and providing relief for smaller businesses.
This shift in tone is a positive development. While we continue to advocate for a longer delay and clearer guidance, it is clear that the pressure from small business advocates is making a difference.
NFIB Files Strong Amicus Brief in Ongoing Legal Challenge
The National Federation of Independent Business (NFIB) recently filed an amicus brief with the Fourth Circuit Court of Appeals in Community Associations Institute v. Treasury. The brief argues that the CTA exceeds congressional authority under the Commerce Clause, as it regulates noneconomic activity.
This case is part of a growing number of legal challenges against the CTA across the country. Judges in several jurisdictions have raised serious concerns about the law’s scope, and rulings in these cases could have significant implications for small businesses.
Looking Ahead
With both Congress and the courts taking action, there is real momentum toward positive changes. ALA will continue to advocate for policies that protect lighting manufacturers, retailers, and distributors from unnecessary regulatory burdens.
Stay tuned for updates on these important developments, and feel free to contact Laurie Gross, Interim President and CEO, with questions or to get involved in our advocacy efforts.
