Justices Asked to Keep Corporate Transparency Act Block in Place

The US Supreme Court should preserve a Fifth Circuit injunction that blocks certain ownership reporting requirements under the Corporate Transparency Act, otherwise tens of millions of businesses could face expensive compliance burdens, companies said Friday.

A lawsuit initiated by firearms retailer Texas Top Cop Shop Inc. and other entities over the CTA’s reporting requirements led to a nationwide injunction by the US Court of Appeals for the Fifth Circuit until it determines the constitutionality of the law. Texas Top Cop Shop asked the justices to deny the government’s request to the Supreme Court to suspend the injunction.

The entities said they will urge the Fifth Circuit during oral arguments on March 25 to repeal the entire act because the government is proposing “a whole grab bag of powers.”

“The CTA’s unprecedented scope crosses a line long reserved for the states by regulating an entity’s status instead of its actions,” the brief said.

The CTA requires businesses to file beneficial reporting information to Treasury Department’s Financial Crimes Enforcement Network. FinCEN estimates 32.6 million existing US businesses, plus another 5 million newly-incorporated ones each year, will need to file reporting information and that businesses will spend 150 million hours and $30 billion coming into compliance.

But the act impacts many business entities such as homeownership associations, charities, private trusts and other entities that don’t engage in business transactions, Texas Top Cop Shop said. The government also doesn’t dispute that the CTA is an unprecedented incursion into an area that has exclusively been a province of the states, the brief said.

In its application for a stay on Dec. 31, 2024, the government said it would be harmed because the injunction cripples Treasury’s efforts to enforce the law while sowing confusion.

“If the order is not stayed, the resulting harms to U.S. anti-corruption efforts—and, ultimately, the U.S. financial system as a whole—would likely be severe,” the government said.

A group of 25 Republican attorneys general filed a brief supporting the plaintiffs Thursday, agreeing that the act would create a substantial compliance burden.

A number of other groups on Friday filed amicus briefs backing the plaintiffs and attacking the government’s justification that the law, designed to hamper money laundering, is legitimized by the Constitution’s Commerce Clause. They also raised a host of concerns about the CTA in an effort to keep the injunction.

The National Retail Federation said compliance will require “considerable time and attention” to gather personal information from beneficial owners or else they’ll face hefty fines. In also supporting the injunction, the National Small Business Association cited constitutional and privacy concerns.

One of the weightiest arguments against the CTA is how it authorizes “the government to engage in the warrantless collection of sensitive private information is precisely what the Fourth Amendment prohibits,” NSBA said.

Ten other amicus briefs were also filed Friday.

The Center for Individual Rights, Baker Hostetler and S|L Law PLLC represent the plaintiffs.

The case is Texas Top Cop Shop v. Garland, U.S., No. 24A653, response in opposition to application for stay 1/10/25.