Texas Federal Court Blocks Enforcement of Corporate Transparency Act Nationwide
12/5/2024
From The Trusted Professional:
Texas Federal Court Blocks Enforcement of Corporate Transparency Act Nationwide
Published Date:
Dec 4, 2024
Bloomberg Tax reported that the Corporate Transparency Act and its implementing regulations, which mandate U.S. business entities report to the Treasury Department stakeholder information, were preliminarily blocked nationwide by a Texas federal court on Dec. 3.
The court ruled that this nationwide injunction applies to the CTA’s enforcement and its imminent Jan. 1, 2025 filing deadline. According to The National Law Review, since this is only a preliminary injunction, it warned reporting firms to be vigilant about additional updates and proceeding in this as well as other cases that could amend or change this order.
At the request of Texas Top Cop Shop, Judge Amos L. Mazzant III of the U.S, District Court for the Eastern District of Texas issued the injunction. The police equipment store is among other co-plaintiff businesses and the Libertarian Party of Mississippi. According to Bloomberg Tax, the lawsuits said that the CTA is not within Congress’s purview to regulate interstate and foreign commerce since it regulates incorporated entities regardless of whether they engage in commercial activity.
Under the CTA, roughly 32.6 million existing business entities disclosed their beneficial owners to the Treasury Department’s Financial Crimes Enforcement Network prior to 2025. The government stated that the law's function—to regulate anonymous shell companies and prevent money laundering, terrorism financing, and other illicit economic activity—is within Congress’s regulatory duties, Bloomberg Tax reported.
However, the court’s opinion noted that the CTA still did not pass muster, despite the fact that Congress can regulate anonymous corporate operations. This is due to the Constitution’s Commerce Clause that cannot be utilized to force the disclosure of information for law enforcement reasons, Bloomberg Tax reported.
Bloomberg Tax reports that representing the plaintiffs are S|L Law PLLC and the Center for Individual Rights.
The case is called Texas Top Cop Shop, Inc. v. Garland, E.D. Tex., No. 4:24-cv-00478, 12/3/24.
