Texas Court Lifts Injunction on Enforcement of Corporate Transparency Act
The U.S.District Court for the Eastern District of Texas stayed its preliminary injunction against the enforcement of the Corporate Transparency Act's (CTA's) beneficial ownership information reporting requirements after the Supreme Court granted a stay of a similar injunction in another case against the requirements. Judge Jeremy Kernodle lifted the preliminary injunction, citing the high court's decision (Smith v. U.S. Department of Treasury, E.D. Tex. # 6:24-336).
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Last month, the Supreme Court granted the stay pending the disposition of the government's appeal of the preliminary injunction, now currently before the U.S. Court of Appeals for the 5th Circuit. Justice Neil Gorsuch penned a concurrence, declaring that he would have used the case to settle the issue of whether district courts can issue nationwide injunctions. Justice Ketanji Brown Jackson wrote the lone dissent. She said there was no need for the high court to intervene given that the 5th Circuit has "expedited its consideration of the Government's appeal."
The Texas court first issued an injunction in the case in December 2024 in a separate case on the CTA's reporting requirements after finding that the law intrudes on individual 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" (see 2412060058).
The Financial Accountability & Corporate Transparency (FACT) Coalition, an advocacy group promoting a transparent tax system, celebrated the lifting of the injunction. The group's director, Ian Gary, said in a statement that "Treasury is now once again free to continue its full and faithful implementation of the most important anti-money laundering law of the past two decades."
Scott Greytak, director of advocacy for Transparency International U.S., added that "Treasury should move swiftly to make sure that this vital national security law is fully enforced, and that America’s law enforcement officials are armed with the tools necessary to cut off the flow of dirty money from transnational criminals into the U.S.”
Meanwhile, the case proceeds before the 5th Circuit, where, most recently, a group of Democratic lawmakers filed an amicus brief in support of the CTA. Sens. Sheldon Whitehouse, D-R.I., Ron Wyden, D-Ore., Elizabeth Warren, D-Mass., and Jack Reed, D-R.I.; and Rep. Maxine Waters, D-Calif., argued that the CTA is a "legitimate exercise of Congress's authorities." The brief said the law is a "garden-variety, valid exercise of Congress’s core Article I authorities, supported by extensive congressional factfinding and a robust legislative record."