OMAHA (DTN) -- A federal court in Texas has blocked rules for the Corporate Transparency Act (CTA), including the provisions that required farmers, ranchers and other businesses to provide their ownership information to the U.S. Treasury Department.
An injunction issued Tuesday in the U.S District Court of Eastern Texas granted a nationwide preliminary injunction against the Treasury Department from enforcing the act. The case was filed by a firearms company, Texas Top Cop Shop Inc., and other businesses.
In the injunction, U.S. District Judge Amos Mazzant stated the CTA is likely unconstitutional as it is outside Congress' power and creates a "new form of federal power," he stated. Mazzant described the law as a "quasi-Orwellian statute" as well.
"The notation that one may use a company to veil their illicit financial crimes is unassailable. But the Commerce Clause does not justify regulating all companies based on nothing more than the fear that a reporting company might shelter a financial criminal," Mazzant wrote.
Passed by Congress in 2021, the Corporate Transparency Act requires businesses to file business ownership interests reports to Treasury by Jan. 1, 2025, known as the Beneficial Ownership Information (BOI) provisions of the law. The injunction halts that provision.
The law was being challenged in multiple jurisdictions and there will likely be federal appeals courts rulings that could eventually lead to a Supreme Court case. Congress also could take action to roll back the law.
The BOI requirement applies to any small business that files documents to incorporate with their state business authority -- such as their secretary of state office. This includes corporations, limited partnerships and limited liability companies. Registered businesses must register any beneficial owner of the company with the Treasury Financial Crimes Enforcement Network (FinCEN).
The American Farm Bureau Federation had estimated more than 230,000 farm operations were affected by the BOI provisions.
Congress passed the CTA as a way to reduce financial crime such as tax fraud and money laundering. It was also passed coming out of the pandemic when there was a great deal of fraud -- more than $200 billion -- tied to problems such as Small Business Administration (SBA) disaster loans.
In a statement, AFBF President Zippy Duvall said the CTA essentially required farmers and other businesses to provide private business ownership details to the federal government.
"Farmers and ranchers across the country have faced great uncertainty since the passage of the Corporate Transparency Act in early 2021 and as the Beneficial Ownership Information regulations have been written," Duvall said. "Questions are swirling about who is required to file and who will have access to the confidential data being collected."
Duvall added, "Farm Bureau has long fought against the mandated disclosure of farmers' private business information to the federal government in a number of different scenarios. For a second time this year a federal court has ruled the CTA oversteps the Constitution on that front. We appreciate the temporary reprieve provided by the injunction and hope Congress can take a cue from the courts in the coming weeks to provide a more permanent resolution to this problematic policy."
See, "Mom and Pop Businesses Will Have to Meet New Federal Reporting Rules," https://www.dtnpf.com/…
Also see, "What Farmers Need to Know About BOI,"
Chris Clayton can be reached at Chris.Clayton@dtn.com
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