Corporate Transparency Act Blocked Nationwide by Texas Court
On December 3rd, a Texas federal court issued a preliminary nationwide injunction blocking the enforcement of the Corporate Transparency Act (CTA) and its associated regulations, which require U.S. businesses to report stakeholder information to the Treasury Department.
Judge Amos L. Mazzant III of the U.S. District Court for the Eastern District of Texas granted the injunction following a lawsuit filed by Texas Top Cop Shop Inc.—a family-owned firearms and tactical gear retailer—alongside other co-plaintiff businesses and the Libertarian Party of Mississippi. The plaintiffs argued that the CTA exceeds Congress’s powers under the Commerce Clause because it regulates incorporated entities regardless of their engagement in commercial activity.
Mazzant noted that the plaintiffs have legitimate concerns about the statute’s expansive nature and its implications for the federal system of government.
The CTA mandates that an estimated 32.6 million existing business entities disclose their beneficial owners to the Treasury Department’s Financial Crimes Enforcement Network by 2025. The government contended that the law aims to crack down on anonymous shell companies and deter money laundering, terrorism financing, and other illicit economic activities, thereby falling within Congress’s regulatory duties.
However, the court’s opinion stated that the CTA does not hold up under scrutiny because, even if Congress can regulate anonymous corporate operations, the Constitution’s Commerce Clause cannot be used to compel the disclosure of information solely for law enforcement purposes.
Mazzant emphasized that simply being a company does not grant Congress unlimited authority to regulate all aspects of its operations, especially through legislation like the CTA that does not explicitly regulate commerce.
The Justice Department did not immediately respond to an emailed request for comment.
The plaintiffs are represented by S|L Law PLLC and the Center for Individual Rights.
The case is Texas Top Cop Shop, Inc. v. Garland, filed in the Eastern District of Texas, No. 4:24-cv-00478, dated December 3rd, 2024.
