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The argument over the Corporate Transparency Act and BOI reporting goes on

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The legal battles over the Corporate Transparency Act and its beneficial ownership information reporting mandate continue.

On Dec. 18, 2024, the New Civil Liberties Alliance filed an amicus curiae brief in Texas Top Cop Shop v. Garland, urging the Court of Appeals for the Fifth Circuit to reject the government’s request to stay a preliminary injunction against enforcement of the CTA. Only a few days later, he Court of Appeals decided to lift the injunction on Dec. 23.

The CTA mandates that organizations that have filed under state law must submit detailed reports that include sensitive information to the Treasury.

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“NCLA is concerned by the government’s expansive interpretation of the Commerce Clause to authorize an administrative agency the power to regulate and obtain sensitive information from over 30 million for-profit and nonprofit corporate entities irrespective of any connection to economic activity that affects interstate commerce,” argued NCLA’s Sheng Li, counsel for amicus curiae. “Such an interpretation would transform the Commerce Clause into a grant of general police power — a power the federal government does not possess and that belongs to the states.”

The Supreme Court has drawn a bright line limiting the Commerce Clause’s reach to only economic activities that have a substantial effect on national markets, Li noted, adding that the government’s request to stay the preliminary injunction ignores this important limitation. 

“According to the government, Congress may regulate the creation and continued existence of corporate persons based on the theory that such entities will one day engage in economic activities that impact interstate commerce,” Li noted. “This court should deny the stay request because it is based on a boundless interpretation of the Commerce Clause that is utterly incompatible with limited government.”

Failure to comply with the filing requirement, whether by omission or by submission of false information, results in serious civil and criminal penalties that are not tied to commercial transactions nor to any other sort of economic activity, and are not limited to for-profit corporations but also apply to certain nonprofits.

The only “activity” that triggers the CTA’s reporting requirements is the entity being created by the filing of incorporation paperwork with the appropriate official, according to LI. 

“Such mere filing is not an economic activity regulable under the Commerce Clause, because it does not involve the production, consumption or exchange of any good or service for which there is a national market. Nor can the government anticipate future economic activity that a corporate person will one day engage in to justify regulating its birth and continued existence under the Commerce Clause,” he said. 

Don’t stop collecting BOI information

Meanwhile, the issue is moving forward in other jurisdictions. Courts in Virginia and Oregon have approved the CTA, while courts in Alabama and Texas have ruled against it. Although some had pinned their hopes on Congress’ continuing resolution to keep the federal government funded, the final version that passed failed to grant a delay in enforcement. 

The American Institute of CPAs continues to advise members that, “at a minimum, those assisting clients with BOI report filings continue to gather the required information from their clients and are prepared to file the BOI report if the injunction is lifted.”

Mark Limardo, a partner in the tax department with New York law firm Herrick, agreed. “The filing itself is pretty light,” he said. “The actual work is leading up to determining whether an entity is exempt and has to file at all. It can get fairly complicated to determine if they have an exemption. The law is still evolving on how exemptions will apply. And once you get past the exemptions, you have to figure out organizational documents, and who the 25% shareholders are. If a company is owned 75% by another corporation, you have to figure out who those shareholders are, and that can be a problem. The way things stand, you have to do everything you need to do so you can push a button on short notice, but on the other hand you may be spending a lot of money and time on something that may never go into effect.” 

“However the issue is decided, it would have significant implications on Congress’ ability to regulate under the Commerce Clause, which generally has been interpreted to mandate some sort of economic activity,” Li concluded. 

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Accounting

IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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Accounting

At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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