The 5th U.S. Circuit Court of Appeals in New Orleans has halted enforcement of the Corporate Transparency Act (CTA), a federal anti-money laundering law requiring corporations and limited liability companies to disclose their beneficial owners to the U.S. Treasury Department. This decision delays a key reporting deadline initially set for January 13, 2025.
The appellate court’s order came late Thursday, reversing its earlier decision to temporarily lift a nationwide injunction. That injunction, issued by U.S. District Judge Amos Mazzant in Texas on December 3, declared the CTA unconstitutional, citing concerns about federal overreach and states’ rights under the Tenth Amendment. Judge Mazzant characterized the law as a “quasi-Orwellian statute” that exceeded Congress’s regulatory powers.
While the appellate court initially allowed enforcement to proceed pending the government’s appeal, a different three-judge panel has now decided to keep the law on hold. The court stated that pausing enforcement was necessary “to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments.”
The CTA, enacted in 2021, requires corporations and LLCs to report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), which combats money laundering and related financial crimes. Supporters of the law argue it addresses the misuse of anonymous entities for illicit activities, including money laundering.
The National Federation of Independent Business and several small businesses, represented by the conservative Center for Individual Rights, successfully challenged the law in Texas.
FinCEN, which has not commented on the decision, now faces uncertainty as it awaits further legal proceedings. Meanwhile, businesses across the country will not be required to meet the upcoming reporting deadline until the courts resolve the law’s constitutionality.
