A new reporting requirement would require reporting for cash real estate purchases.
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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. Wake, who litigates cases on the nondelegation doctrine and regulatory overreach, said, “You can hardly move a stone without implicating some sort of regulation.”
Geographical Targeting Orders (GTOs)
The rule didn’t simply materialize out of nowhere—it was a slow build. In 2016, FinCEN began issuing “geographic targeting orders” (“GTOs”) that required East Texas Title “to file reports and maintain records concerning non-financed purchases of residential real estate… by certain legal entities in select metropolitan areas of the United States.” The GTO was subsequently expanded, with FinCEN claiming that it was successful in identifying the supposed risks of non-financed real estate transactions. As a result, the rule was expanded nationwide.
(If you’re struggling to recall where you heard the term “GTO” recently, it made news after the Trump administration issued a GTO in March 2025 requiring all money services businesses (MSBs) located in 30 ZIP codes across California and Texas to file Currency Transaction Reports (CTRs) with FinCEN at a $200 threshold for cash transactions. The threshold for all other areas remains $10,000.)
Complying with these rules is, the plaintiff claims, time-consuming and costly. It’s not just recordkeeping—the costs would include legal counsel and staff time to create new procedures to track and ensure proper reporting for every transaction.
And relying on keywords like suspicious could result in reporting rules being expanded to include other transactions. Wake muses that, by relying on such broad language and delegated authority, FinCEN could require reporting from any business owner or taxpayer deemed to be engaged in transactions that could be suspicious. “It could be a hot dog vendor in Manhattan,” he says.
Constitutional Claims
FinCEN asserts statutory authority for the rule under a provision of the Bank Secrecy Act. The Secretary of the Treasury has subdelegated his rulemaking authority under the Bank Secrecy Act to the Director of FinCEN. FinCEN relied on that delegated authority to promulgate the final rule. That, Wake argues, is constitutional overreach.
“Congress cannot shirk its lawmaking responsibilities by granting federal agencies a blank check to write laws,” said Wake. “FinCEN is now mandating unreasonable collection and reporting of personal information to the federal government; the agency claims a sweeping power to require reporting on conceivably any consumer transaction simply because systematic reporting might prove useful to the government.”
Only Congress can write the laws that govern us, he says, pointing to the nondelegation doctrine. The nondelegation doctrine is a principle originating in Article I of the Constitution, which granted legislative authority to Congress. The idea is that Congress may not surrender its legislative authority to other entities. The doctrine hasn’t been invoked a great deal—the last time it was successfully used to strike down laws was 1935. In that case, A.L.A. Schechter Poultry Corp. v. United States, the Supreme Court held that “Congress is not permitted to abdicate or to transfer to others the essential legislative functions with which it is thus vested.” The deciding factor in that case was a lack of specificity—in that case, the Supreme Court found that the applicable law “sets up no standards… We think that the code-making authority this conferred is an unconstitutional delegation of legislative power.”
Last year, the Supreme Court agreed to hear consolidated separation of powers cases involving the delegation of powers. The cases, now captioned as Federal Communications Commission et al., Petitioners v. Consumers’ Research, et al., were granted the right to be heard on November 22, 2024, and focused on whether Congress unlawfully delegated the power to tax to the Federal Communications Commission (FCC), which then delegated its power to a private company. Oral arguments were heard in March 2025. Wake, on behalf of PLF, submitted an amicus brief in support of the respondents in that case. (When it comes to legal issues before the Supreme Court, those with an interest or expertise in the subject but who aren’t a party to the litigation may also file briefs to explain their point of view. These briefs are called amicus briefs and are filed by a party known as an amicus curiae, which translates to “friend of the court.”)
And finally, the Fourth Amendment protects people against “unreasonable searches and seizures” of “persons, houses, papers, and effects.” This includes business records, claims East Texas Title Companies in its filings. The rule compels “warrantless, physical, trespassory searches by requiring the production, to FinCEN, of papers containing information that the agency compels reporting persons and entities to gather.” There is, the plaintiff argues, “[n]o legal doctrine that renders this compelled transfer of private information directly to the government through papers a non-search.”
About The Case
The case is East Texas Title Co. v. Bessent, filed in U.S. District Court for the Eastern District of Texas and assigned to Judge Jeremy Kernodle. If that name rings a bell, it’s because, on January 7, 2025, Kernodle granted a preliminary injunction and stay in Smith v. U.S. that prohibited FinCEN from enforcing the CTA.
The plaintiff is seeking an order setting aside the rule on the basis that it is unlawful. Barring any such order or injunction, the real estate reporting rule is set to go into effect in December 2025.
