US Corporate Transparency Act Injunction Overturned by Fifth Circuit
The Corporate Transparency Act (CTA) has been rejuvenated following an appeals court ruling that allows its enforcement during ongoing legal proceedings. Under this law, 32.5 million of US small business owners must register with the FinCEN by January 13, or face potential fines of up to $10,000.
- The United States Court of Appeals for the Fifth Circuit has reinstated the immediate enforceability of the Corporate Transparency Act (CTA). In the case of Texas Top Cop Shop, Inc. v. Garland, a three-judge panel decided to stay a lower court's nationwide preliminary injunction against the CTA that had been issued on December 3, 2024.
- The CTA mandates that the proprietors and co-proprietors of approximately 32.5 million small businesses in the States must submit personal details to FinCEN. This includes the full legal names, home addresses, and birth dates of beneficial owners, along with photo identification, taxpayer identification numbers, and other relevant business details.
"The government has made a strong showing that it is likely to succeed on the merits in defending the CTA's constitutionality," the court decision stated, adding that it aligns with the "public's urgent interest in combating financial crime and protecting our country's national security."
- The CTA, an anti-money laundering law passed in 2021, aims to expose shell companies and combat money laundering. Treasury Secretary Janet Yellen stated in 2022 that it targets criminals hiding their identities. The rules took effect in 2024, giving existing businesses until January 1, 2025, to register, while new businesses have 90 days to do so.
"For good reason, Plaintiffs fear this flanking, quasi-Orwellian statute and its implications on our dual system of government. Despite attempting to reconcile the CTA with the Constitution at every turn, the Government is unable to provide the Court with any tenable theory that the CTA falls within Congress's power. And even in the face of the deference the Court must give Congress, the CTA appears likely unconstitutional," wrote Judge Amos L. Mazzant III of the US District Court for the Eastern District of Texas when issuing the injunction.
- In response to the Fifth Circuit ruling, FinCEN announced an extension of the deadline for reporting companies. Under existing law, a company created or registered before January 1, 2024, has until January 1, 2025, to file its initial report. This rule applies regardless of when the company was established. The new extended deadline is now January 13, 2025.
- Per FinCEN, failure to file can result in penalties of up to $591 per day. Additionally, businesses may face criminal penalties of up to two years in prison and fines of up to $10,000, according to the Chamber of Commerce.
- Many publicly traded companies, nonprofits, and certain large operating companies are exempt from filing beneficial ownership information.
"This situation is rapidly evolving. In the coming days, the challengers in this case could seek further review from the Fifth Circuit or seek relief from the United States Supreme Court. Additionally, several other federal courts are actively considering challenges against the CTA," writes National Law Review.
5th Circuit Order
Reuters Article / Archive
CBS Article / Archive
Forbes Article / Archive
- Do you want more? Subscribe and get No Bullshit GM report straight to your mailbox.
- Follow No Bullshit Bitcoin on Nostr.
- Feedback or news tips? Drop it here.
