A panel of three Supreme Court justices recently declined to block the enforcement of an anti-money laundering law passed by Congress which is being challenged in the courts. This law mandates that businesses share the identities of the owners who benefited from their firms with the United States Treasury office.
The Corporate Transparency Act was passed in 2021 by Congress in an attempt to stop money laundering. Challengers to the law argued that Congress overstepped its powers and that such regulation should be the province of the states.
The Act was blocked in December by Judge Amos L. Mazzant of the Federal District Court in Sherman, Texas, who said that Congress had exceeded its authority, as per the Constitution. Judge Mazzant granted a preliminary injunction prohibiting the government from enforcing the Act while the legal challenge to the law was pending.
That inunction was stayed on January 23 by a three-judge panel of the Supreme Court, allowing the law to go into effect even while the case is pending appeal in the High Court.
This case is viewed as a critical test for the Supreme Court regarding the powers of President Donald Trump, who is seeking to edit the Act. The conservative majority Supreme Court most often offers decisions that are anti-regulatory.
In the recent one-paragraph order penned by Justice Samual Alito as part of the 3-judge panel, the stay was granted “pending the disposition of the appeal in the United States Court of Appeals for the Fifth Circuit and disposition of a petition for a writ of certiorari, if such a writ is timely sought. Should certiorari be denied, this stay shall terminate automatically. In the event certiorari is granted, the stay shall terminate upon the sending down of the judgment of this Court.”
The Corporate Transparency Act requires businesses to disclose ownership details, but implementation was blocked by a federal judge who found the law to be “beyond Congress’s authority.” This Act is controversial since numerous critics say that it not only is a danger to a business owner’s privacy but also violates the Constitution because it allows the federal government to regulate laws historically handled by states, not Congress. To others, however, the Act is important at the federal level, since it can help fight money laundering nationwide.
While concurring with Justice Alito, Justice Neil Gorsuch added in the decision that he would like to “go a step further and, as the government suggests, take this case now to resolve definitively the question whether a district court may issue universal injunctive relief.”
The third Justice on the panel, liberal Supreme Court Judge Ketanji Brown Jackson, dissented from the decision of her two fellow justices, who are both conservatives from a political standpoint. For Jackson, the government would not be harmed by allowing the injunction to remain in place while the case works its way through the appellate process.
The advancing challenge to the provisional stay to the law was brought by numerous entities, including the Libertarian Party of Mississippi, a firearms company, a technology firm, and the National Federation of Independent Business.
The latter plaintiff, the National Federation of Independent Business, also challenged the Affordable Care Act previously, where the group argued that the Constitution’s Commerce Clause does not allow Congress to control or regulate “inaction” in contrast to economic activity.
The same arguments are now being used in this new challenge to the Corporate Transparency Act, where the plaintiffs claim Congress is overstepping its authority under the Constitution.
Federal Court Judge Mazzant, in enjoining the implementation of the federal law, wrote that “though seemingly benign… this federal mandate marks a drastic twofold departure from history. First, it represents a federal attempt to monitor companies created under state law — a matter our federalist system has left almost exclusively to the several states. Second, the C.T.A. ends a feature of corporate formation as designed by various states — anonymity. For good reason, plaintiffs fear this flanking, quasi-Orwellian statute and its implications on our dual system of government.”
The next stage in the case will occur on March 5 when arguments will be heard in the Fifth Circuit Court of Appeals.