Corporate Transparency Act Challengers Assail Law in New Filing

The Corporate Transparency Act, which would require millions of American businesses to report information on their beneficial owners, is both onerous and unconstitutional, two small business owners told a federal judge in Texas.

In a brief filed Friday with the US District Court for the Eastern District of Texas, Samantha Smith and Robert Means said the CTA “marks a sweeping expansion of federal authority into matters traditionally reserved to the states.” They asked the judge to keep in place an earlier order preventing the federal government from enforcing the law while a separate case is heard in the US Court of Appeals for the Fifth Circuit.

“In the face of this unprecedented expansion of federal power, this Court rightly granted preliminary relief preventing the CTA and its implementing rule from going into effect,” the brief states.

The court previously issued a preliminary injunction and a stay on key implementing regulations, halting halted the planned Jan. 13 enforcement date of the act. “Today, this Court’s order is the only judicial relief preventing the federal government from enforcing the CTA,” Smith and Means said in their brief.

If the law goes into effect, some 32 million US businesses would need to file information on their owners to the Treasury Department’s Financial Crimes Enforcement Network.

The two plaintiffs in the case own limited liability companies that control a single piece of property in Texas. They say the CTA’s requirement to list beneficial ownership information for businesses such as theirs is an unconstitutional federal intrusion into commerce regulated by the states.

The brief comes a week after the federal government defended the CTA, arguing that the law could help deter $300 billion in annual fraud and international money laundering. Despite Republican resistance, the Trump administration appears ready to push the controversial law forward if it’s successful in overturning the district court order keeping enforcement at bay.

The Fifth Circuit is scheduled to hear oral arguments April 1 in another dispute, Texas Top Cop Shop Inc. v. Bondi, which also challenged the CTA’s constitutionality. That case involves a nationwide injunction against the law from a different Eastern District of Texas judge, an order that the US Supreme Court ultimately put on hold pending further litigation.

FinCEN said it would give companies 30 days to comply with the act’s requirements if the enforcement block is lifted, but that could change. The House voted 408-0 Feb. 10 to pass a bill that would push the reporting requirements to January 1, 2026. The measure is pending in the Senate.

The same day as the Texas business owners filed their brief, Transparency International, the Foundation for Defense of Democracies, and several other interested parties—including Nate Sibley of the Kleptocracy Initiative and Albert Torres of the George W. Bush Institute—filed an amicus brief in the Texas Top Cop Shop case in favor of upholding the law.

They cited several instances where the CTA would be helpful, including foreign entities that have owned real estate in the US as well as schemes to traffic illegal drug proceeds and government contracting dollars across borders.

The Texas Public Policy Foundation represents the plaintiffs in the Smith case.

The case is Smith v. Dep’t of the Treasury, E.D. Tex., No. 6:24-cv-00336, response filed 2/14/25.