Texas Court Enjoins Enforcement of Corporate Transparency Act, US Appeals
A federal court in Texas on Dec. 3 preliminarily enjoined the government from enforcing the Corporate Transparency Act's (CTA) beneficial ownership information reporting requirements, finding that the law violates various elements of the U.S. Constitution. Judge Amons Mazzant found that the CTA "intrudes upon States' rights under the Ninth and Tenth Amendments," compels speech and harms the right of association under the First Amendment and violates the Fourth Amendment by "compelling disclosure of private information."
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The U.S. has already filed an appeal of the decision, taking the ruling to the U.S. Court of Appeals for the 5th Circuit.
The ruling was hailed by the National Federation of Independent Business, one of the plaintiffs in the action, as "a huge victory for small businesses nationwide, and just in time." Rep. French Hill, R-Ark., similarly praised the decision, saying in a statement that it's an "important step ahead of the nearing deadline and may save small business owners from steep civil and criminal penalties."
The court said the CTA, at "its most rudimentary level," regulates companies by requiring them to report their ownership, "including detailed, personal information about their owners," to the federal government.
Mazzant said the Act marks a "drastic two-fold departure from history." It amounts to a federal bid to "monitor companies created under state law" and "ends a feature of corporate formation as designed by various States -- anonymity." The judge said that businesses "fear" the "flanking, quasi-Orwellian statute and its implications on our dual system of government" for "good reason."