Last Thursday, the U.S. Supreme Court declined to block enforcement of the Corporate Transparency Act (CTA), an anti-money laundering law requiring millions of businesses to disclose their real beneficial owners to the Treasury Department. However, enforcement remains on hold due to conflicting lower court rulings, leaving the fate of the law to be potentially decided by President Donald Trump's new administration.

The justices put on hold a nationwide injunction issued on Dec. 3 by U.S. District Judge Amos Mazzant in Texas, which concluded that Congress exceeded its constitutional authority in passing the law in 2021. While the Supreme Court's decision allows the CTA's enforcement to proceed, it remains blocked by a separate order from Texas-based U.S. District Judge Jeremy Kernodle in another case.

The CTA was enacted to combat money laundering, tax fraud, and the financing of terrorism by requiring corporations and limited liability companies (LLCs) to report their beneficial owners—individuals who directly or indirectly own or control the company—to the Treasury Department's Financial Crimes Enforcement Network (FinCEN). Beneficial ownership transparency has been championed by law enforcement and anti-corruption advocates as a key tool to prevent financial crimes.

Opponents, led by small businesses and represented by the conservative Center for Individual Rights, argue the law imposes invasive reporting requirements and harsh penalties. "We remain confident that the law's invasive reporting requirements and draconian penalties will be ruled unconstitutional," said Todd Gaziano, president of the Center for Individual Rights.

The Biden administration defended the law, asserting that its reporting requirements are critical to preventing and prosecuting crimes such as money laundering and tax evasion. Solicitor General Elizabeth Prelogar argued that the CTA falls under Congress’s authority to regulate interstate commerce and is essential for national and economic security.

The Supreme Court's decision not to lift the injunction underscores the contentious legal debate surrounding the CTA. Conservative Justice Neil Gorsuch agreed with putting the injunction on hold but expressed concerns about the broader implications of allowing individual federal judges to issue nationwide injunctions. He suggested the court should address the issue directly.

In contrast, liberal Justice Ketanji Brown Jackson dissented, questioning why a further delay in enforcing the law would harm the government, given that it had postponed enforcement for nearly four years after the law’s enactment.

President Trump, who returned to office earlier this week, now faces the decision of whether to pursue or modify the law. His administration could drop pending challenges, including those against similar state laws in Texas and Oklahoma. The conflicting rulings by lower courts have created uncertainty for businesses and the government as the Jan. 13 deadline for reporting approaches.

While the Biden administration stated that millions of entities had already complied with the reporting requirements before the injunction, it remains unclear how enforcement will proceed.

Supporters of the CTA argue that the law addresses vulnerabilities that make the U.S. an attractive destination for financial crimes. Critics, however, maintain that the law infringes on states' rights under the 10th Amendment and imposes onerous compliance burdens on small businesses.

The Trump administration will need to decide whether to uphold the CTA or pursue legislative amendments. Meanwhile, the Supreme Court's reluctance to fully weigh in leaves the future of the law in limbo, with questions about congressional authority on this issue and nationwide injunctions yet to be resolved.