By Heather Lobermann and Emily Smoot
The U.S. Department of the Treasury has announced that the requirement to file mandated reports under the Residential Real Estate Rule (the “Rule”) is currently on pause. This announcement comes on the heels of the recent ruling by the U.S. District Court for the Eastern District of Texas in Flowers Title Companies, LLC v. Bessent.
Flowers Title Companies, LLC v. Bessent
In a Memorandum Opinion and Order published on March 19, 2026, the court held that the Rule was unconstitutional and vacated the rule nationwide. In doing so, the court found that the Financial Crimes Enforcement Network (FinCEN)’s Rule exceeded FinCEN’s authority under the Banking Secrecy Act.
The court was not moved by FinCEN’s justifications, finding that the Rule was too overbroad. Many individuals purchase property through an LLC or trust for tax or liability reasons. This routine practice does not indicate that such a transaction, in the eyes of the court, is inherently suspicious. Further, many real estate purchases are conducted without financing to avoid interest and other legitimate reasons. The court was similarly not persuaded by FinCEN’s arguments that these sorts of transactions sufficiently merit the reporting requirements under the Rule.
Fifth Circuit precedent led the court to vacate the Rule nationwide, rather than just among the parties. Rather than deviating from this precedent, the court determined that the Rule’s defects were serious enough to warrant a nationwide vacatur.
What Happens Next?
The Rule is currently not in effect. FinCEN has announced that it will comply with the court order in Flowers Title Companies, LLC v. Bessent. Please do be aware, however, that there is currently a circuit split among courts throughout the United States. In Fidelity National Financial, Inc. v. Bessent, the U.S. District Court for the Middle District of Florida judge adopted the magistrate’s recommendation to grant FinCEN’s cross-motion for summary judgment, holding that the Rule is constitutional.
With this circuit split, it is likely that further action will be taken regarding the Rule. FinCEN could opt to appeal the decision in Flowers Title Companies, LLC v. Bessent, seeking a stay on the vacatur pending appeal. FinCEN could also undergo rulemaking to revise or narrow the Rule.
We will continue to monitor information regarding the litigation and/or regulatory path of the Rule. When updates are available, we will provide them to you.
How Can KDDK Help?
Contact attorneys Kent A. “KAB” Brasseale, II, Heather Lobermann, or Emily Smoot, by email or phone at (812) 423-3183. Please note that in order for KDDK to assist with a CTA filing, our services must be separately and specifically engaged through our CTA assistance engagement form.
Where to Learn More About the Rule?
Additional information is available on the FinCEN website. KDDK has previously written the following blog post regarding the Rule:
