Adobe Stock
In a victory for small business, the U.S. District Court for the Eastern District of Texas on Tuesday issued a preliminary nationwide injunction prohibiting the enforcement of the Corporate Transparency Act.
In Texas Top Cop Shop, Inc., et al. v. Garland, et al. the court ruled that Congress overstepped its legislative authority in enacting the CTA, describing it as “quasi-Orwellian.” The decision emphasized that supporting the CTA’s mandate for most entities created or registered under state law to continuously disclose information to the federal government “would be to rubber-stamp a new form of federal power” that could “threaten the very fabric of our system of federalism.”
Judge Amos Mazzant, appointed by President Barack Obama, wrote the majority opinion. Mazzant received his law degree at Baylor.
The decision will likely not be the end of the legislation.
The court could theoretically reconsider its preliminary injunction at some point in the future. More likely is that the government will immediately appeal the decision to the United States Court of Appeals for the Fifth Circuit. An appeal to the U.S. Supreme Court would be next.
Until a court explicitly lifts the Top Cop Shop injunction, companies will remain exempt from complying with the CTA’s reporting requirements.
The Corporate Transparency Act was enacted by Congress on Jan. 1, 2021, as part of the National Defense Authorization Act. The CTA was designed to combat money laundering, tax fraud, and terrorist financing.
The plaintiffs, including small business owners and a trade association, argued that the CTA compels speech and association, infringing on First Amendment protections. They also raised concerns about privacy violations under the Fourth Amendment.
Nonetheless, the city of Fort Worth and various partners are hosting an educational small business webinar on the Corporate Transparency Act this Thursday.
The webinar is designed to inform about new federal reporting requirements that businesses must meet by Jan. 1.
The date is Thursday — Dec. 5 — from 4-5 p.m.
Noncompliance could lead to significant fines.
The webinar will provide participants with the essential steps to stay compliant with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network.
The webinar will be conducted on Microsoft Teams. A webinar link will be emailed to all registered participants. Register now.
The session also will be recorded and available in English and Spanish, so it can be accessed at your convenience.