By Julie Tomascik
Editor

The Corporate Transparency Act (CTA), which would require U.S. businesses, including farms, to report stakeholder information to the U.S. Treasury Department, was preliminarily blocked nationwide by a Texas federal judge this week.

U.S. District Judge Amos Mazzant in East Texas issued the nationwide injunction, saying the act falls outside of Congress’ powers to regulate interstate and foreign commerce.

“The fact that a company is a company does not knight Congress with some supreme power to regulate them in all aspects—especially through the CTA, which does not facially regulate commerce,” Mazzant wrote.

The ruling temporarily stops the law that would have required owners and key figures of an estimated 32 million businesses to submit personal information to the U.S. Treasury Department’s Financial Crimes Enforcement Network before 2025.

The act, according to Congress, aimed to assist law enforcement in uncovering shell companies involved in crimes like money laundering, terrorism financing and illicit economic activity. However, several groups, including the American Farm Bureau Federation, argued the law infringes on civil liberties and overreaches federal authority.

“This is a major win for farmers, ranchers and small businesses,” Regan Beck, TFB director of Government Affairs, said.

This marks the first nationwide injunction against the CTA. Earlier this year, an Alabama judge also found the act unconstitutional but limited their ruling to members of the National Small Business Association.

Mazzant’s opinion cited the CTA’s potential violation of the 10th Amendment, which reserves powers not delegated to Congress for the states.

“For good reason, Plaintiffs fear this flanking, quasi-Orwellian statute and its implications on our dual system of government,” Mazzant wrote in the 79-page opinion. “If sanctioned, there’s no telling how Congress might control companies in the future.”

In September, U.S. District Judge Michael Simon in Portland declined to issue a preliminary injunction against the act, deferring to Congress’ intent to combat crime. That decision is currently under appeal with the 9th Circuit Court of Appeals.

Meanwhile, the federal government has appealed the Alabama court’s ruling to the 11th Circuit Court of Appeals, which has yet to issue a decision.

The ongoing legal battles leave the future of the act uncertain as courts weigh its potential impact on civil liberties and the balance of state and federal authority.