Supreme Court Allows Corporate Transparency Act Enforcement (1)

The US Supreme Court on Thursday said it will allow the government to implement the Corporate Transparency Act, requiring millions of businesses to file information on their beneficial owners.

The justices stayed the injunction blocking the enforcement of the CTA, which requires US entities to disclose who owns and controls their businesses.

The move paves a path for the government to move ahead with enforcement of the law while its merits are being debated in the US Court of Appeals for the Fifth Circuit. That court plans oral arguments March 25.

It doesn’t, however, reinstate the Jan. 13 deadline to file ownership information with the Treasury Department’s Financial Crimes Enforcement Network.

A representative for the agency didn’t immediately respond to a request for comment.

Justice Neil Gorsuch concurred in the decision, saying he would “go a step further and, as the government suggests, take this case now to resolve definitively the question whether a district court may issue universal injunctive relief.”

Justice Ketanji Brown Jackson dissented, saying she didn’t see a need for intervention because the government hadn’t proven exigency.

“The Government has provided no indication that injury of a more serious or significant nature would result if the Act’s implementation is further delayed while the litigation proceeds in the lower courts,” she wrote.

Under the law, most incorporated business entities that existed before 2024 must file their ownership and control information with FinCEN. The agency estimates 32.6 million US businesses will need to disclose beneficial ownership information or face penalties, as will an estimated 5 million new businesses incorporated annually.

Texas Top Cop Shop Inc., a firearm retailer represented by the federalist advocacy nonprofit Center for Individual Rights, has challenged the constitutionality of the law, and its case is one of several working through the courts. Business groups have criricized the law while transparency advocates have cheered it.

“The next steps are exactly what we were planning this morning, we are litigating this in the Fifth Circuit, where we think we are right and will prevail,” said CIR Litigation Director Caleb Kruckenberg.

Transparency advocates say allowing the law to go into effect could prevent the use of illicit money.

“With the CTA now once again enforceable, law enforcement will be better equipped to stop criminals who use anonymous U.S. shell companies to launder fentanyl profits,” Nate Sibley, a Hudson Institute fellow and director of the group’s Kleptocracy Initiative, said in a statement.

Eleventh Hour Zig-Zag

The CTA has sent tax professionals scrambling as its enforcement was halted by a judge in the US District Court for the Eastern District of Texas, then allowed by the Fifth Circuit, then had its filing deadline pushed back, before finally being halted again in the last few days of December.

Judge Amos L. Mazzant III blocked enforcement of the CTA nationwide Dec. 3. That order was lifted Dec. 23 by the motions panel of the US Court of Appeals for the Fifth Circuit. FinCEN then pushed back the original Jan. 1 deadline for most companies to file. Enforcement was again halted when a different Fifth Circuit panel, looking at the merits of the appeal, reinstated the injunction Dec. 27.

The US Department of Justice asked the Supreme Court to weigh in Dec. 31.

FinCEN said after the injunction was reimposed that beneficial ownership information can still be disclosed on a voluntary basis. If the act is made mandatory, businesses would face $500-a-day fines for knowingly failing to file. As of Dec. 3, about 10 million businesses had submitted beneficial ownership information, according to FinCEN information.

Tom O’Saben, director of tax content and government relations at the National Association of Tax Professionals,told Bloomberg Law the group has advised that businesses should err on the side of caution by filing information. That also staves off any problems with filing that could result if a rush of new filings causes technical issues with FinCEN’s submission process.

SL Law PLLC also represents Texas Top Cop Shop and several other named plaintiffs, including the National Federation of Independent Businesses.

The case is McHenry v. Texas Top Cop Shop Inc., U.S., No. 24A653, application for stay granted 1/23/25.