Corporate Transparency Act Block Lifted After SCOTUS Ruling (1)

The last remaining nationwide block against enforcement of the Corporate Transparency Act was stayed by a Texas district court pending the government’s appeal to the Fifth Circuit.

The CTA and its implementing regulations, which require millions of US business entities to report their beneficial ownership information to the Treasury Department’s Financial Crimes Enforcement Network, had been on ice after courts successively enjoined the law’s enforcement throughout December and January.

Judge Jeremy D. Kernodle of the US District Court for the Eastern District of Texas on Feb. 17 stayed his order blocking the law in light of the US Supreme Court’s order in a separate challenge, McHenry v. Texas Top Cop Shop, Inc.

Kernodle on Jan. 7 had stayed the effective date of key implementing regulations for the CTA, which had imposed an initial deadline for about 32 million US business entities to file their disclosures with the government. At the time, the CTA had also been enjoined by another Texas judge, but the Supreme Court weighed in on Jan. 23 to lift that injunction.

The government asked Kernodle on Feb. 5 to follow suit.

FinCEN didn’t immediately respond to an emailed request for comment and its beneficial ownership information page hasn’t yet updated to reflect the latest order.

The government had been accepting companies’ beneficial ownership disclosures on a voluntary basis since the first nationwide injunction was issued late last year.

Proponents of the CTA say the law cracks down on anonymous shell companies employed in illicit financial schemes like tax evasion, terrorist financing, and drug trafficking. But since it passed as part of an anti-money laundering package in the 2021 National Defense Authorization Act, businesses have challenged its disclosure requirements as onerous and in excess of Congress’s constitutional authority.

The US House of Representatives voted 408-0 on Feb. 10 in favor of pushing the CTA’s reporting deadline to January 1, 2026. The measure is pending in the US Senate.

The US Court of Appeals for the Fifth Circuit is scheduled to hear oral arguments on April 1 in Texas Top Cop Shop, concerning an injunction predating the one issued by Kernodle.

The Texas Public Policy Foundation represents the plaintiffs.

The case is Smith v. US Dep’t of the Treasury, E.D. Tex., No. 6:24-cv-00336, 2/17/25.