Corporate Transparency Act: Preliminary Injunction

PRESS RELEASE

For Immediate Release: December 3, 2024

Texas Federal Judge Issues Nationwide Injunction to Halt Unconstitutional Corporate Transparency Act (CTA)

32 Million Small Businesses and Nonprofit Organizations Spared from the Threat of Criminal Punishment as the CTA Compliance Deadline Loomed

WASHINGTON, D.C. – This afternoon, the U.S. District Court for the Eastern District of Texas issued a nationwide injunction halting the implementation of the Corporate Transparency Act’s beneficial ownership reporting requirements. The Court ruled inTexas Top Cop Shop, Inc., et al. v. Garland, et al., a lawsuit brought by the Center for Individual Rights on behalf of five small entities and the National Federation of Independent Business (with its 300,000 members).

The CTA is an unwarranted federal surveillance law that, until today, required 32 million small businesses to report private and confidential information to federal law enforcement or face civil and criminal penalties. It requires almost all organizations registered with states or tribal authorities to file reports containing intrusive, costly, and confidential ownership information with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury no later than January 1, 2025.

Although it was supposedly enacted to combat financial crime, the law exempts large corporate entities and financial firms, leaving mostly small businesses and some nonprofit organizations to comply. Failure to comply with CTA reporting can result in uncapped and unlimited daily civil penalties of up to $500 per day, criminal sanctions of up to $10,000 in fines, and up to two years’ imprisonment, or both.

“The Constitution nowhere authorizes Congress to engage in indiscriminate surveillance of small businesses and nonprofits by demanding they disclose private records relating to who directly or indirectly controls them,” said Caleb Kruckenberg, the Litigation Director for the Center for Individual Rights. “As the deadline loomed for businesses to file reports, we are delighted to see that federal Judge Amos Mazzant stopped this unconstitutional intrusion from taking effect.”

The Center for Individual Rights has also taken the lead in an appeal of a similar lawsuit from Oregon in the U.S. Ninth Circuit Court of Appeals. That case is Firestone v. Yellen. It is quite possible that conflicting rulings in different courts of appeal would induce the Supreme Court to step in and issue an emergency ruling before the end of 2024.

About the Center for Individual Rights:
The Center for Individual Rights is a national public interest legal organization that provides free representation to clients whose rights have been violated or are seriously threatened. Celebrating its 35^th year, CIR has an impressive record of landmark victories in the Supreme Court of the United States and many other courts, setting legal precedents that restore and protect fundamental individual rights that are necessary for a flourishing and free society.

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