A US federal court in Texas has blocked the enforcement of the Corporate Transparency Act (CTA) nationwide, ruling that the law was likely unconstitutional and would irreparably harm companies. The CTA, set to require an estimated 32.5 million US companies to submit sensitive owner information to the Department of the Treasury’s Financial Crimes Enforcement Network by January 1, 2025, has been deemed “quasi-Orwellian” by the court.
The court determined that Congress exceeded its powers when enacting the CTA and that forcing reporting companies to comply with the law would threaten their constitutional rights. It also found that upholding the CTA would be a significant extension of legislative power and could set a precedent for further regulation of US companies.
As a result, the court issued a preliminary injunction, which effectively blocks enforcement of the CTA nationwide until further order is given. Companies created or registered in 2024 will still need to submit beneficial owner information to FinCEN, but existing reporting companies are exempt from the law’s requirements.
The decision is likely not the final word on the CTA’s enforceability, with the government set to appeal to the US Court of Appeals for the Fifth Circuit and potentially the Supreme Court.
Source: https://natlawreview.com/article/texas-federal-court-blocks-corporate-transparency-act-halts-nationwide-enforcement