For the first time, the U.S. Supreme Court is addressing the argument surrounding the Corporate Transparency Act (CTA), a law requiring certain business entities to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). The case has sparked debates over the Act's constitutionality, judicial reach, and its nationwide implications. The controversy began when a preliminary injunction issued by U.S. District Court Judge Amos Mazzant in Texas temporarily halted the law’s enforcement nationwide. The injunction was requested by the National Federation of Independent Business (NFIB), effectively suspending the CTA’s reporting requirements across all states, an action the Department of Justice (DOJ) argues exceeds the judicial scope.
The DOJ contends that congressional enactments, such as the CTA, are presumed valid and enforceable unless determined otherwise by judicial resolution. It emphasizes that the CTA is crucial for ensuring business transparency and combating financial crimes. The government further argues that the injunction causes confusion among businesses that had been preparing to comply with the CTA requirements, initially scheduled to take effect on January 1, 2025. In response to the legal challenges, FinCEN extended the compliance deadline to January 13, 2025, and exempted businesses from filing reports while the injunction remains in place.
The Fifth Circuit Court of Appeals has issued conflicting rulings regarding the injunction. In December 2024, it granted the DOJ's motion to stay the injunction, allowing the CTA to be enforced temporarily. However, the panel later reversed this decision, restoring the injunction and halting FinCEN’s implementation of the Act. This back-and-forth has left businesses in legal uncertainty regarding their obligations under the CTA.
The DOJ has petitioned the Supreme Court to address two key questions: whether the injunction should be vacated entirely or limited to only NFIB and its members, and whether district courts have the authority to issue nationwide injunctions. The government has also requested that the Court consider its application as a petition for a writ of certiorari before judgment, granting the Supreme Court final jurisdiction over the case. A decision to take up the case could have implications beyond the CTA, potentially redefining the boundaries of judicial power in federal law challenges.
Meanwhile, similar legal challenges to the CTA are unfolding in other courts. A federal judge in Alabama recently declared the Act unconstitutional, though the decision applies only to the plaintiffs involved in that case. Appeals challenging the CTA have also been filed in the Fourth and Ninth Circuit Courts of Appeals. These parallel litigations, alongside the NFIB case in Texas, have created significant uncertainty regarding the enforcement and future of the CTA.
The Supreme Court has scheduled oral arguments for the NFIB case on March 25, 2025. The Court’s decision could potentially bring clarity to businesses by resolving the conflicting rulings and setting a precedent for the nationwide application of federal laws. While the Court is under no obligation to grant the DOJ's request or hear the case, its involvement could have far-reaching consequences for both the CTA and the broader issue of judicial authority in issuing nationwide injunctions.
For now, the Corporate Transparency Act remains in legal limbo. As the Supreme Court deliberates on the case, the outcome could redefine the intersection of transparency, federal authority, and judicial power, shaping the future of business regulation in the United States.
