US Asks Supreme Court to Unblock Corporate Transparency Act

The US Department of Justice asked the US Supreme Court to halt a nationwide injunction against the Corporate Transparency Act, a move that would allow enforcement of the anti-money laundering law during an appeal.

The US said the lower court injunction should be stayed since the high court traditionally applies a strong presumption in favor of allowing challenged acts of Congress to remain pending a final review, according to the application filed Tuesday.

The federal government is challenging a Dec. 3 injunction by a federal judge in Texas, who found that passing the anti-money laundering law overstepped Congress’ constitutional authority under the Commerce Clause. While a Fifth Circuit panel initially ruled in the government’s favor to allow the law’s reporting requirements, a second panel stepped in Dec. 26 to re-block enforcement.

The CTA would require roughly 32.6 million existing business entities to disclose their beneficial owners to the US Treasury Department, a requirement intended to crack down on illegal economic activity. But the district court ruled that the Commerce Clause can’t be leveraged to compel the disclosure of information for law enforcement purposes.

The back-and-forth rulings have added significant uncertainty to the holidays for corporate compliance officials, who started the month facing a Jan. 1 filing deadline that was frozen, then unfrozen, then pushed back a few weeks by Treasury, then re-blocked.

The government contends that Congress is empowered under the Commerce Clause to adopt the CTA’s reporting requirements. Even if its appeal to the US Court of Appeals for the Fifth Circuit is unsuccessful, the US said the justices would likely grant certiorari and hear the merits of the case, as typical when a lower court holds an act of Congress unconstitutional.

The government also said that the Constitution’s Necessary and Proper Clause permits the CTA’s reporting requirements since it is a “necessary” and “proper” function of Congress, according to the application.

“Congress has enacted, and this court has upheld, reporting requirements that implement a variety of other enumerated powers,” the DOJ said.

The case is Garland v. Texas Top Cop Shop Inc., U.S., No. 24A653, application 12/31/24.