Published by Forbes.com | April 25, 2025
After the Treasury declared it would not enforce the CTA against domestic companies, a lawsuit has been filed to stop a similar reporting rule for cash real estate purchases.
A lawsuit filed in the Eastern District of Texas this month could upend another Treasury reporting rule. Months after the Treasury announced it would not enforce the Corporate Transparency Act (CTA) against domestic companies, Flowers Title Companies LLC d/b/a East Texas Title Companies v. Bessent aims to block a new rule requiring data collection—this time focused on reporting for cash residential real estate purchases.
In 1993, Celia Flowers, a Texas attorney, bought the first of many title companies she now owns (the company’s website boasts 11 offices). Today, Flowers and her daughter, Erica Hallmark, own and manage East Texas Title Companies, based in Tyler, Texas, a mid-sized city located about an hour and a half southeast of Dallas.
Title companies typically assist with transferring property ownership during a real estate transaction. That can involve researching and clearing title searches and assisting with real estate closings. East Texas Title Companies claims it handles thousands of such real estate closings each year. Some of those closings have involved cash purchases, subjecting them to a new Treasury reporting requirement. East Texas Title Companies is pushing back on the reporting requirement with a lawsuit, claiming the rule is burdensome and unconstitutional.
Reporting Requirement
In 2024, the Financial Crimes Enforcement Network (FinCEN) finalized a rule to require title companies to collect and report detailed information about non-financed residential real estate sales to legal entities (including small businesses), trusts, and shell companies. The rule would not require the reporting of sales to individuals.
For purposes of the rule, non-financed means that it does not involve an extension of credit secured by the transferred property and extended by a financial institution subject to existing reporting obligations—no commercial mortgage or paid for by cash, for example. Transfers financed by private lenders that do not have certain existing reporting obligations would also need to be reported.
There is no threshold purchase price for the transfer—the transfer would be reportable irrespective of purchase price. That also means that transfers of ownership for which no consideration is exchanged, like gifts, would need to be reported. (Exempt transfers would include those involving an easement, the death of the property’s owner, the result of a divorce, or those made to a bankruptcy estate.)
If some of this sounds familiar, it’s because there are similarities between the largely gutted Corporate Transparency Act (CTA) reporting requirement and this rule. For example, for purposes of the real estate reporting rule, information that must be reported includes the identity of the reporting person, the legal entity or trust to which the residential real property is transferred, the beneficial owners of that transferee entity or trust, the person that transfers the residential real property, and the property being transferred, along with certain transactional information. (Sound familiar?)
However, FinCEN has drawn some distinctions between the real estate reporting rule and the CTA, stating that this “is a tailored reporting requirement that would capture a particular class of activity that Treasury deems high-risk and that warrants reporting on a transaction-specific basis.”
As with the CTA, breaking the rules—even accidentally—could lead to hefty fines and even criminal charges.
The Complaint
On April 14, 2025, East Texas Title Companies filed a lawsuit challenging the reporting rule on several grounds. In the complaint, the company claimed that it “objects to being conscripted into performing government surveillance on its clients”—specifically, the requirement to hand over its records to FinCEN without a warrant. The information being requested, argues the company, is beyond what is necessary to facilitate real estate closings in compliance with state and local law. And finally, East Texas Title Companies contends that the rule is unconstitutional as a violation of the separation of powers.
Luke Wake, an attorney for Pacific Legal Foundation, representing East Texas Title Companies pro bono (for free), told Forbes the requirements under the reporting rule were “incredibly sweeping,” noting that the authority claimed by FinCEN under the Banking Secrecy Act authorizes reporting for “any suspicious transaction relevant to a possible violation of law or regulation.”
In this case, the “suspicious” element is a cash transaction. According to the authorities, cash purchases of residential real estate are considered high risk for money laundering. FinCEN Director Andrea Gacki said in a statement last year that it was “an important step toward not only curbing abuse of the U.S. residential real estate sector, but safeguarding our economic and national security.”
(FinCEN did not immediately respond to a request for comment for this article.)
East Texas Title Companies disputed that characterization in its court filings, arguing that there is nothing inherently suspicious about a buyer using their own money. The company claims that buyers who can afford to purchase property without a loan may do so for many legitimate reasons, including saving on lending costs and interest payments by paying out of their own pocket.
Such broad language is also concerning, the company argues, because “there is no limit to what sort of consumer transactions FinCEN might require reporting on” if the agency were to find it useful for regulatory purposes.
