New Legal Brief Challenges Corporate Transparency Act’s Constitutionality

A Texas federal court is once again considering the Corporate Transparency Act (CTA), the law that would require millions of US businesses to disclose their beneficial owners. Two small business owners asked the court to uphold a previous ruling that blocked the law and said it’s unconstitutional and overreaches federal authority.

In a brief filed with the US District Court for the Eastern District of Texas, business owners Samantha Smith and Robert Means argued the CTA “marks a sweeping expansion of federal authority into matters traditionally reserved to the states.” They say the law is an undue burden on small businesses and unconstitutional.

Originally set to take effect Jan 13, 2025, the CTA would have required 32 million businesses to submit ownership info to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). But a temporary injunction from a Texas court stopped it.

The government is pushing back saying the CTA is a vital tool to fight financial crimes. They estimate the law could prevent up to $300 billion in fraud and money laundering each year. Despite some business owners and Republican lawmakers opposing it, the Trump administration will move forward with the law if they can overturn the injunction.

In the meantime, Congress is considering a delay. The House just voted 408-0 on a bill to move the reporting deadline to January 1, 2026. It’s currently in the Senate.

The legal battle is also playing out in the Fifth Circuit Court of Appeals, where a separate case, Texas Top Cop Shop Inc. v. Bondi, challenges the CTA’s constitutionality. Verbal proceedings are set for April 1 and a previous decision in that case resulted in a nationwide injunction against the law—though the US Supreme Court put that on hold.

The CTA supporters, including Transparency International and the Foundation for Defense of Democracies, have filed an amicus brief saying the law is necessary to stop money laundering through real estate and drug trafficking.

With multiple lawsuits and legislation in play, the fate of the Corporate Transparency Act is up in the air, leaving small business owners and financial regulators to await.

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