The U.S. Supreme Court on Thursday took a significant step toward enforcing the Corporate Transparency Act, a 2021 law requiring millions of business entities to disclose the identities of their beneficial owners to the Treasury Department. Despite this decision, the law remains on hold as its future could still be influenced by President Donald Trump’s administration.
Court Blocks Injunction, Law Remains Suspended
The Supreme Court’s decision effectively blocks the nationwide injunction issued by U.S. District Judge Amos Mazzant of Texas. Mazzant, acting on behalf of small businesses, had ruled that the law overstepped constitutional boundaries. Despite the court’s decision to temporarily lift the injunction, a separate ruling from U.S. District Judge Jeremy Kernodle continues to keep the law’s enforcement on hold.
The law’s implementation had been delayed after Judge Mazzant’s ruling, which blocked enforcement as of December 3, 2024. This had halted the deadline for millions of businesses to submit their beneficial ownership reports to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
Trump Administration’s Role in the Case
Lawyers representing small businesses have indicated that the outcome of the case may now depend on the actions of the newly inaugurated Republican administration, led by former President Donald Trump. They argued that the law’s reporting requirements were intrusive and may be ruled unconstitutional.
“We remain confident that the law’s invasive reporting requirements and draconian penalties will be ruled unconstitutional,” said Todd Gaziano, president of the Center for Individual Rights.
Law’s Purpose and Supporters’ Arguments
The Corporate Transparency Act aims to combat the use of shell companies to launder money, finance terrorism, and evade taxes. The law requires corporations and limited liability companies (LLCs) to report their beneficial owners to FinCEN, a division that analyzes financial transactions to prevent illicit activity.
Supporters, including the Biden administration, argue that the law’s reporting requirements are crucial for preventing financial crimes. Solicitor General Elizabeth Prelogar emphasized that these efforts would help detect and prosecute money laundering, tax fraud, and terrorism financing.
Challenges to the Law’s Constitutionality
Judge Mazzant ruled that the law likely violated the 10th Amendment, which protects states’ rights, and went beyond Congress’s authority under the Commerce Clause. Prelogar, however, argued that Congress is within its constitutional rights to regulate economic activities impacting interstate commerce, a key point in the ongoing legal debate.