Texas Court Strikes Down Corporate Transparency Act – A Huge Win for Business Owners!

On December 3, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction, effectively halting the Corporate Transparency Act (CTA) enforcement. This ruling comes just weeks before the year-end compliance deadline.

The Corporate Transparency Act, enacted in 2021, aims to combat money laundering by requiring certain businesses to disclose their beneficial ownership information to a database managed by the Financial Crimes Enforcement Network (FinCEN) under the U.S. Department of the Treasury.

In the case of Texas Top Cop Shop v. Garland, plaintiffs argued that the CTA exceeds Congress’s authority to regulate interstate and foreign commerce and infringes on First Amendment protections. Judge Amos L. Mazzant III agreed with the plaintiffs, stating that the act is “likely unconstitutional.”

“Plaintiffs rightfully fear the implications of this statute on our dual system of government,” Judge Mazzant wrote. “Despite the government’s efforts to align the [Corporate Transparency Act] with constitutional principles, it has not presented a valid justification for the act falling within Congress’s powers.”

This decision follows a similar ruling in March when the U.S. District Court for the Northern District of Alabama found the CTA unconstitutional in National Small Business United v. Yellen. FinCEN has appealed that ruling, and the case is now before the 11th Circuit Court of Appeals.

With the nationwide injunction, businesses are no longer required to meet the January 1, 2025, filing deadline under the CTA. FinCEN has not yet indicated how it will respond to the injunction.

Small business advocates continue to push for removing unnecessary regulatory burdens, emphasizing the importance of allowing business owners to focus on operations and growth without excessive compliance requirements. All of this provides Americans with a bird ‘ s-eye view of Government overreach and one that has become too focused on control. From our perspective, the U.S. Government should never stray from the Constitution.

For more details about the Corporate Transparency Act and beneficial ownership requirements, visit fincen.gov/boi.