In a significant decision, the U.S. Supreme Court on Thursday declined to block the enforcement of the Corporate Transparency Act, an anti-money laundering law requiring businesses to disclose their real beneficial owners to the Treasury Department.
However, enforcement of the law remains on hold due to a separate injunction, leaving its fate uncertain as President Donald Trump’s administration now considers its next steps.
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The Court’s action temporarily lifts a nationwide injunction issued on December 3, 2024, by Texas-based U.S. District Judge Amos Mazzant. The injunction had been granted at the request of small businesses that argued the law exceeded Congress’ constitutional powers.
Despite the Supreme Court’s decision, a separate order from Texas-based U.S. District Judge Jeremy Kernodle, issued on January 7, continues to block enforcement of the law.
The Corporate Transparency Act, enacted in 2021, requires corporations and limited liability companies (LLCs) to report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a Treasury Department agency tasked with combating money laundering and related crimes. Beneficial owners are defined as individuals who directly or indirectly own or control a company.
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The law was designed to address concerns about the use of U.S.-based entities like LLCs for money laundering, tax evasion, and the financing of terrorism. Proponents argue that the reporting requirements are essential for preventing illicit financial activities.
In a statement, Todd Gaziano, president of the Center for Individual Rights, which represented the small businesses challenging the law, expressed confidence that the law’s “invasive reporting requirements and draconian penalties” would ultimately be ruled unconstitutional.
The Biden administration had sought to stay the injunction, arguing that millions of companies had already complied with the law’s requirements before Mazzant’s ruling.
Solicitor General Elizabeth Prelogar defended the law, asserting Congress has the authority to regulate economic activities that affect interstate commerce under the Constitution’s Commerce Clause.
She also emphasized the law’s importance in preventing crimes such as tax fraud and terrorism financing.
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While the Supreme Court’s conservative Justice Neil Gorsuch agreed that the injunction should be put on hold, he called for the Court to address whether an individual judge in one state has the authority to issue nationwide injunctions.
Liberal Justice Ketanji Brown Jackson dissented, arguing that further delays would not harm the government, which had postponed enforcement of the law for nearly four years.
The outcome of this legal battle could have sweeping implications for corporate transparency and state sovereignty. For now, companies are not required to comply with the law as its enforcement remains in legal limbo.