December 9, 2024
A Texas federal court has temporarily blocked the Corporate Transparency Act (CTA) and its related regulations. The CTA mandated U.S. businesses to report ownership information to the Treasury Department and aimed to combat financial crimes by requiring 32.6 million business entities to disclose their beneficial owners by 2025.
While the government contended that the law was essential for preventing money laundering and terrorism financing, the court found that the Constitution’s Commerce Clause does not grant Congress the authority to compel such disclosures for law enforcement. The court emphasized that merely being a corporation does not give Congress unrestricted regulatory power over all business activities.
Judge Amos L. Mazzant III issued the injunction following a lawsuit filed by Texas Top Cop Shop Inc., a family-owned retailer, along with other businesses and the Libertarian Party of Mississippi. They argued that the CTA exceeded Congress’s constitutional powers by regulating incorporated entities, even if they do not engage in commerce.
The ruling has temporarily halted the CTA’s enforcement while the legal challenge continues. The case is Texas Top Cop Shop, Inc. v. Garland (No. 4:24-cv-00478).