Contractors spared as Treasury scraps ownership reporting rule

The Treasury Department on Wednesday scrapped a requirement for certain small businesses to report their owners’ personal information to the government, following a series of back-and-forth legal events. 

Why it matters: Every U.S. business with fewer than 20 employees or less than $5 million in annual revenue, of which there are over 30 million, including many contractors, would have been impacted. 

What’s happening: The rule was part of a law — the Corporate Transparency Act (CTA) — which took effect in 2024 to crack down on criminal activity conducted through shell companies. 

• The law required businesses to submit basic information on all owners with more than a 25 percent stake to the Treasury Department by January 1, 2025. 
• Zoom in: After taking a legal rollercoaster ride — it was blocked from being enforced in December and then reinstated in February — the Treasury Department on Wednesday officially exempted all companies. 

What they’re saying: “[The]… expectation of receiving over 32 million such reports annually attests to the CTA’s excessive reach and the impracticality of its enforcement,” ACCA CEO Barton James wrote in 2024.

• “The law’s effectiveness is further doubtful as it relies on self-reporting by the very individuals it seeks to regulate,” he added.