The future of a four-year-old federal law designed to enhance corporate ownership transparency, while also combating illicit financial activities, is very much uncertain in the wake of a new ruling from the U.S. Fifth Circuit Court of Appeals in New Orleans.
Approved by Congress in early 2021, the Corporate Transparency Act, despite winning the praise of supporters for making life harder for those engaging in money laundering and terrorist financing, has been the target of endless litigation.
Critics of the legislation, such as the National Small Business Association, have charged that despite its good intentions, the CTA is too intrusive, demanding too much personal information about a company’s owners and officers.
Last year Alabama Republican Senator Tommy Tuberville introduced a bill to repeal the CTA, noting that its effect is to “create a database on every American business owner.”
Added Tuberville: “This unprecedented intrusion into personal privacy must be stopped.”
Tuberville’s legislation was subsequently endorsed by the Associated Builders and Contractors, Independent Bankers Association, and National Federation of Independent Businesses, among more than 100 business organizations.
Federal courts have split on the constitutionality of the act, with rulings in Oregon and Virginia saying the CTA is a valid exercise of the power of Congress under the Constitution’s Commerce Clause, and two courts in Alabama and Texas taking the opposite stand.
Now the Fifth District Court of Appeals has issued a preliminary injunction prohibiting enforcement of the CTA. The court has scheduled oral arguments for March 25. But some legal scholars are predicting that the Supreme Court may issue a ruling on the matter before then.
January 10, 2025
By Garry Boulard
