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BREAKING: Federal Court Blocks Corporate Transparency Act Enforcement Nationwide; Reporting Companies “Need Not Comply” with January 1 Deadline
Jake Slowik
Federal Court Blocks Corporate Transparency Act Enforcement Nationwide

A Texas federal court has issued a nationwide injunction against the Corporate Transparency Act (CTA) and its implementing regulations, ruling that Congress likely exceeded its constitutional authority in enacting the law. The December 3, 2024 decision by Judge Amos L. Mazzant of the Eastern District of Texas blocks enforcement of the CTA's beneficial ownership reporting requirements that would have affected an estimated 32.6 million U.S. companies.

Key Holdings:
  • The court found that Congress lacks authority under both the Commerce Clause and Necessary and Proper Clause to mandate beneficial ownership reporting
  • The CTA improperly regulates companies' "anonymous existence" rather than any actual commercial activity
  • Neither foreign affairs powers nor tax collection authority justifies the CTA's broad requirements
  • Current compliance deadlines, including the January 1, 2025 deadline for existing companies, are stayed pending further court order
Impact and Analysis:

The ruling marks a significant setback for the Treasury Department's efforts to combat financial crimes through increased corporate transparency. Judge Mazzant characterized the CTA as a "quasi-Orwellian" law that would "threaten the very fabric of our system of federalism" by intruding on states' traditional authority over business entities.

The court rejected the government's arguments that the CTA was justified as:
  • A regulation of interstate commerce
  • A necessary measure for tax administration
  • An exercise of foreign affairs powers to meet international standards
  • A proper use of federal law enforcement authority
Notably, the court issued a nationwide injunction rather than limiting relief to the plaintiffs, finding that the constitutional issues at stake and the integrated nature of the reporting system made nationwide relief appropriate.

Next Steps:

The government will likely appeal to the Fifth Circuit Court of Appeals. A separate challenge to the CTA is already pending before the Eleventh Circuit. Given the complexity of the constitutional issues involved and the law's importance to anti-money laundering efforts, further litigation is expected.

Companies should continue monitoring developments while the constitutionality of the CTA is ultimately resolved. The ruling demonstrates courts' willingness to scrutinize expansive federal regulatory programs that intrude on traditional state powers, even when justified by law enforcement or national security concerns.

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