Second Challenge in Fight Against Federal Surveillance Law

Firestone v. Yellen

A coalition of small businesses in Oregon is challenging the Corporate Transparency Act (CTA), an intrusive federal law that requires 32 million small businesses to report confidential information to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The Center for Individual Rights (CIR) has joined the litigation to lead the appeal in the Ninth Circuit.

In combination with CIR’s challenge in Texas Top Cop Shop v. Bondi, Firestone is the second prong in CIR’s tactical assault on the unconstitutional Corporate Transparency Act.

Illegal Searches into Private Business Records

The CTA-mandated reports must identify and provide personal information about each entity’s “beneficial owners.” Beneficial owners are vaguely defined but include any person who exercises sufficient formal or informal control of the entity. The exact nature of that control is unspecified, and could include very informal support for a small business, like a family member offering a small no-interest loan to help start a business.

Because the reports are so vague, small businesses may feel pressure to provide more information rather than less to avoid the CTA’s onerous penalties. Failure to comply with CTA reporting can result in uncapped and unlimited daily civil penalties of up to $500 per day, and criminal sanctions of up to $10,000 in fines and up to two years’ imprisonment, or both.

Although it was enacted to combat financial crime, the law exempts those most likely to engage in financial crimes, like large corporate entities and financial firms, leaving mostly small businesses and some non-profit organizations to comply.

The Lawsuit

Seven individual Plaintiffs in Oregon filed a lawsuit challenging the CTA on the grounds that Congress has no authority under the Constitution to compel businesses to disclose private information to federal law enforcement merely because their businesses registered with the state. The law’s reporting mandate also violates the First Amendment’s protection for free association and the Fourth Amendment right to freedom from warrantless searches.

On November 22, 2024, CIR filed an emergency application with the Ninth Circuit on behalf of the plaintiffs to stop the CTA from taking effect until after litigation is complete. CIR is partnering in the appeal with Kell, Alterman & Runstein, L.L.P., a Portland, Oregon law firm that represented the plaintiffs in the district court.

On March 21, 2025, in direct response to CIR’s litigation, the Treasury Department issued an “interim final rule,” pausing its enforcement of the CTA on domestic entities and limiting its reach to foreign-owned entities, and it also welcomed public comment on what the true final rule should provide. The immediate effect of that action was to relieve most American small businesses of their obligation to comply with the CTA’s reporting requirements—at least for this calendar year.

The future of the CTA still remains uncertain. The interim rule provides a reprieve for small businesses that have not complied with the CTA, but it is not a permanent resolution. The Treasury Department’s supposedly “final” regulation later this year could itself be changed by the next administration. Accordingly, until the court acts decisively, the CTA remains a looming threat.

In response to the interim rule and pending rulemaking proceeding, however, the U,S. Ninth Circuit Court of Appeals removed this case form its emergency docket and postponed the previously scheduled oral argument on the injunction motion. Because no one can be sure of the future of the law or the scope of its application, the plaintiffs remain under a cloud of uncertainty regarding whether they will eventually be forced to comply with the CTA’s onerous demands.