Court Issues Injunction Against Corporate Transparency Act

NIFB and NSBA Applaud Ruling

By Todd McElwee

The National Federation of Independent Business (NFIB) and National Small Business Association (NSBA) are celebrating an important legal victory. On December 3, the U.S. District Court for the Eastern District of Texas granted NFIB’s request for a preliminary injunction, blocking the Treasury Department from enforcing the Corporate Transparency Act’s (CTA) beneficial ownership information (BOI) reporting requirements.

“This ruling is a huge victory for small businesses nationwide, and just in time” said Beth Milito, Executive Director of NFIB’s Small Business Legal Center. “For many Main Street small businesses, they were a mere four weeks away from the deadline to file their information in accordance with the CTA. The BOI reporting requirements are a harmful invasion of small business owners’ privacy and a misuse of their valuable time. Thankfully, the Court agreed and granted a preliminary injunction, giving small business owners a reprieve from this burdensome rule.”

Enacted by Congress on January 1, 2021, the CTA included significant reforms to anti-money laundering laws and is intended to help prevent and combat money laundering, terrorist financing, corruption, and tax fraud, the U.S. Chamber of Commerce said. Small businesses need to file beneficial ownership information reports (BOIR) with the Department of the Treasury by January 1. Failure to submit by the deadline puts small business owners at risk of criminal penalties, imprisonment, and fines up to $10,000. The Chamber developed a CTA toolkit and provided updated information on the matter.

NFIB’s lawsuit argues the CTA is unconstitutional in that it exceeds Congress’s authority over the states, improperly compels speech, contradicts the right of anonymous association guaranteed by the First Amendment, and violates the Fourth Amendment by forcing the disclosure of private information. The association partnered with The Center for Individual Rights (CIR) and filed the lawsuit with the Texas Top Cop Shop, Data Comm for Business, Mustardseed Livestock, Russell Straayer, and Libertarian Party of Mississippi.

“Because NFIB and its nearly 300,000 members were a party to this case, the judge blocked enforcement of the BOI reporting requirements nationwide,” NFIB said. “This reaffirms the power that NFIB members hold when they stand up and speak out in protection of their rights.”

NSBA filed a lawsuit against the Treasury Department in November 2022. On March 1, 20224, Judge Liles Burke of the U.S. District Court of the Northern District of Alabama ruled in favor of NSBA’s lawsuit over the constitutionality of the CTA. On September 27, 2024, NSBA’s legal team argued in front of the Eleventh Circuit Court of Appeals in Birmingham.

NSBA President & CEO Todd McCracken said: “NSBA has been leading the charge against the CTA for years. There is widespread confusion and massive concern among America’s smallest businesses about the BOI reports, and we couldn’t be more pleased that this court recognized that confusion and sided with NSBA on the unconstitutionality of the CTA.

“While this injunction isn’t permanent, this is a huge relief to the millions of small-business owners across the country who were facing a wildly complex regulatory regime, and fines that could exceed $500 per DAY and up to two years of jail time.”

McCracken added the association will continue to fight—both through its lawsuit, the first one filed—and in Congress. He said the various lawsuits working their way through the courts are critical to prevent a bad law from going into effect.

“No small-business owner should be spending time during the holidays worrying about a simple mistake landing them in jail—this injunction is a major win, but the battle continues,” McCracken said.