A U.S. appeals court has reinstated a nationwide injunction halting enforcement of the Corporate Transparency Act (CTA), a federal law requiring corporations and limited liability companies (LLCs) to disclose their beneficial owners to the U.S. Treasury Department. The move delays a compliance deadline for millions of businesses originally set for January 13, 2024.
The New Orleans-based 5th U.S. Circuit Court of Appeals issued the order late Thursday, reversing a prior decision earlier in the week that had allowed the law to remain in effect pending an appeal.
The CTA, enacted in 2021, aims to combat money laundering and financial crimes by requiring corporations and LLCs to submit detailed reports on their real beneficial owners to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). Supporters of the law argue it addresses the growing use of U.S. entities by criminals to launder illicit funds.
However, the National Federation of Independent Business and several small businesses, represented by the conservative Center for Individual Rights, challenged the law as unconstitutional. U.S. District Judge Amos Mazzant in Sherman, Texas, sided with the challengers earlier this month, ruling that the law overstepped Congress’s constitutional authority and violated the Tenth Amendment by infringing on states’ rights.
In a strongly worded opinion, Judge Mazzant called the law a “quasi-Orwellian statute” and issued an injunction against its enforcement.
The 5th Circuit’s latest order keeps the injunction in place, pausing enforcement of the law "to preserve the constitutional status quo while the merits panel considers the parties' weighty substantive arguments." A different panel of the appeals court will hear oral arguments on the case on March 25, 2024.
Following the decision, FinCEN announced on Friday that businesses are no longer required to file beneficial ownership reports by the January deadline but may do so voluntarily.
The ultimate fate of the Corporate Transparency Act remains uncertain. The March 2024 arguments will determine whether the 5th Circuit upholds Judge Mazzant’s ruling. In the meantime, businesses across the country are in limbo, uncertain about whether and when they will need to comply with the law’s reporting requirements.
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A contentious Texas law aimed at allowing state authorities to arrest and prosecute individuals suspected of illegally crossing the U.S.-Mexico border remains on hold following a recent decision by the 5th U.S. Circuit Court of Appeals. The law, known as S.B. 4, has ignited a fierce dispute between the state... Read More »
In a significant setback for the Biden administration's efforts to combat financial crimes and increase corporate accountability, an Alabama federal district judge has ruled against the Treasury Department's mandate requiring small business owners to disclose their ownership details. The ruling, delivered late Friday by U.S. District Judge Liles C. Burke,... Read More »
The Corporate Transparency Act now requires shell companies to disclose ownership within a Federal database. Going forward, federal agencies will store proprietary information and share it with investors and banks. Democratic Representative Carolyn Maloney of New York first introduced the bill in 2010 as a means to combat money laundering.... Read More »
