In a sharply divided vote along party lines, a Republican-led House committee has taken the first step toward dismantling the Corporate Transparency Act, a landmark anti-corruption measure designed to expose the true owners of shell companies.
The House Financial Services Committee voted 26 to 25 on Tuesday to advance the Repealing Big Brother Overreach Act, a bill that would eliminate mandatory disclosure requirements for American business owners. Under the proposed new law, only foreign nationals would still be required to report their beneficial ownership to the Treasury Department’s Financial Crimes Enforcement Network.
The original Corporate Transparency Act, passed with bipartisan support in December 2020, was spurred by revelations from global investigations like the Panama Papers, which showed how anonymous shell companies enable tax evasion, terrorism financing, and money laundering. Tuesday’s vote marks a significant departure from that transparency push, drawing sharp criticism from advocacy groups.
“This would be an unprecedented gift to fentanyl traffickers, fraudsters, and foreign adversaries who rely on shell company anonymity,” said Erica Hanichak of the Financial Accountability and Corporate Transparency Coalition, a nonpartisan alliance of over 100 organizations.
Former FBI official Debra LaPrevotte, who spent three decades tracking international corruption, echoed those concerns. “Anonymous U.S. shell companies have long been exploited by kleptocrats and cartels to launder money and buy luxury assets here,” she said. “Gutting this law would remove a crucial tool for tracing illicit funds and prevent the U.S. from becoming a safe haven for criminal proceeds.”
Democrats on the committee warned that exempting Americans would cripple law enforcement efforts. “Without this data, prosecutors investigating shell companies in weapons trafficking, human trafficking, or terrorism are left blind,” said Representative Stephen Lynch of Massachusetts. He argued the Republican proposal “seriously limits our ability to combat illegal operations” and threatens national security.
Republicans defended the repeal, arguing the 2020 law imposes massive burdens on small businesses. Chairman French Hill of Arkansas noted that “people from outside the U.S. forming pass-through entities here would still be subject to the rule.” He also questioned the effectiveness of ownership registries, pointing to Cyprus, the UAE, and Turkey as examples of countries with such databases that remain notorious for money laundering.
The legislative push aligns with President Donald Trump’s broader policy shift. Though he signed the original law in 2020, he ordered the Treasury Department to stop collecting ownership information from Americans early in his second term, limiting the mandate to foreign-owned entities.
The repeal effort now moves to the full House, where Republicans hold a slim majority. Its ultimate fate may depend on whether it can be attached as an amendment to a must-pass bill, similar to the tactic used to enact the Corporate Transparency Act as part of a defense spending measure in 2020.