Corporate Transparency Act Blocked Nationwide by Texas Court
NOTE: Do NOT File Your Business Ownership Information YET! Wait Until the Last Week of December to See if the Supreme Court Rules on this decision before the end of the Year!
By John Woolley, Bloomberg Law.com, December 4, 2024
The Corporate Transparency Act and its implementing regulations, which require US business entities to report stakeholder information to the Treasury Department, were preliminarily blocked nationwide by a Texas federal court on Tuesday.
Judge Amos L. Mazzant III of the US District Court for the Eastern District of Texas issued the injunction at the request of a family-run firearms and tactical gear retailer, called Texas Top Cop Shop Inc., among other co-plaintiff businesses and the Libertarian Party of Mississippi. Their lawsuit alleged that the CTA falls outside of Congress’s powers to regulate interstate and foreign commerce because it regulates incorporated entities regardless of whether they engage in commercial activity.
READ: Why the Corporate Transparency Act is Illegal and Should be Stopped
“For good reason, Plaintiffs fear this flanking, quasi-Orwellian statute and its implications on our dual system of government,” Mazzant wrote.
The CTA required that an estimated 32.6 million existing business entities disclose their beneficial owners to the Treasury Department’s Financial Crimes Enforcement Network before 2025. The government argued that the law’s function—to crack down on anonymous shell companies and deter money laundering, terrorism financing, and other illicit economic activity—falls within Congress’s regulatory duties.
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But the CTA still fails to pass muster, even if anonymous corporate operations can be regulated by Congress, because the Constitution’s Commerce Clause can’t be leveraged to compel the disclosure of information for law enforcement purposes, the court’s opinion said.
“The fact that a company is a company does not knight Congress with some supreme power to regulate them in all aspects—especially though the CTA, which does not facially regulate commerce,” Mazzant said.
The Justice Department didn’t immediately respond to an emailed request for comment.
S|L Law PLLC and the Center for Individual Rights represent the plaintiffs.
The case is Texas Top Cop Shop, Inc. v. Garland, E.D. Tex., No. 4:24-cv-00478, 12/3/24
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