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The Supreme Court takes on CTA, BOI

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In the continuing saga of the fate of the Corporate Transparency Act, the New Civil Liberties Alliance filed an amicus curiae brief with the Supreme Court on Jan. 13, 2025, in Garland v. Texas Top Cop Shop. The brief urges the court to reject the government’s request to stay a preliminary injunction against the enforcement of the CTA and its beneficial ownership information reporting mandate. 

The CTA mandates that organizations that have filed for incorporation under state law submit detailed reports to the Treasury’s Financial Crimes Enforcement Network, or FinCEN, with civil and criminal penalties available to the government to punish those who fail to comply, either by omitting information or even accidentally submitting false information. 

“These invasive requirements would apply to over 30 million nonprofit and for-profit organizations nationwide, and they apply prior to any commercial transactions or other type of economic activity,” according to the NCLA. 

The U.S. Supreme Court building stands in Washington, D.C., U.S., on Tuesday, Feb. 25, 2020. President Donald Trump demanded that Supreme Court Justices Sonia Sotomayor and Ruth Bader Ginsburg recuse themselves from future cases involving his administration after a dissent from a decision allowing the government to test prospective immigrants' wealth.
The U.S. Supreme Court building in Washington, D.C.

Stefani Reynolds/Bloomberg

“The government claims the Constitution’s Commerce Clause authorizes the CTA, but Commerce Clause regulations must target economic activity, which the CTA does not regulate,” the NCLA’s brief noted. “The only thing that triggers disclosure under the CTA is coming into existence by filing incorporation paperwork with a state government, which is not economic activity because it does not involve producing, consuming or exchanging any good or service. The government argues that most organizations that incorporate will engage in future economic activity. But the Supreme Court held in the Obamacare case (NFIB v. Sebelius) that the government cannot justify regulation under the Commerce Clause based on anticipated future economic activity.”

The government’s alternative request — to narrow the scope of the nationwide preliminary injunction to just the corporate entities that sued in the Texas Top Cop Shop case — is likewise flawed, according to the NCLA: “The Administrative Procedure Act expressly authorizes the court to ‘postpone’ the Treasury Department’s rule enforcing the CTA, which necessarily extends to the whole country, not just the litigants.” 

Jamie Schaeffer, a partner at law firm Perkins Coie, said that it’s hard to predict what the court will do.

“The Treasury Department has made multiple alternative requests with broader implications beyond the CTA,” she explained. “One of them is whether it is appropriate for a federal district court to issue a nationwide injunction. Conservative justices generally favor district courts to not have that authority. During the first Trump administration a number of liberal courts took the approach that they had that authority. If the Supreme Court decides that it is not appropriate for a district court to set a nationwide standard, then FinCEN will have to set alternate filing dates. There are a lot of moving parts. We’re advising our clients to be ready to file the BOI Report at a moment’s notice.”

Kevin Granahan, practice management partner at law firm Fox Rothschild, agreed. 

“It’s really an unknown,” he said. “And it’s also unknown what Congress might do. Prior to the holidays, part of the funding package included a provision that would push back the deadline by one year. The final bill did not include that delay, so the question now is whether Congress will take action, especially given the change in administrations. President Trump could tell the DOJ to simply drop the appeals, which would be the death knell for the CTA.”

As for a decision on the merits of the Commerce Clause argument, NCLA litigation counsel Sheng Li said: “It is true that most corporations will engage in commerce after coming into existence. But so will most everyone alive. If the mere propensity for commerce can be the basis for regulation under the Commerce Clause, then that power would be boundless, and any notion of limited government would cease.”

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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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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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