Another federal court in Texas has once again blocked the Corporate Transparency Act (CTA) and its beneficial ownership information reporting requirements, marking another chapter in the contentious legal battle over the act’s implementation.

As reported by Accounting Today on Jan. 8, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction halting enforcements nationwide. The law, passed in 2021, requires business to disclose beneficial ownership information to the Treasury Department, aiming to combat illicit activities like money laundering and tax fraud. 

In this case, two property owners, Samantha Smith and Robert Means, sued the U.S. Treasury Department, arguing that it exceeds federal authority. They claimed their Texas-based LLCs, which hold real estate and do not engage in interstate commerce, should not be subject to the reporting rules. Judge Jeremy Kernodle agreed, writing that the law’s requirements expand federal power “beyond constitutional limits.” He called the government’s interpretation of its authority “unlimited” and found that the law improperly intrudes into matters traditionally governed by state law. 

The decision builds on a previous ruling from the same district court last month, which also temporarily blocked the CTA. The case, Texas Top Cop Shop v. Garland, saw a federal appeals court briefly lift the injunction before reinstating it days later. Meanwhile, the Department of Justice (DOJ) has requested that the Supreme Court Intervene, arguing the law is critical to national security and financial crime prevention, as reported by Trusted Professional on Jan. 16. 

The CTA requires most businesses to file ownership reports with the Financial Crimes Enforcement Network (FinCEN). New businesses (formed after Jan. 1, 2024) began filing reports when the CTA took effect in January 2024, while existing businesses (formed before Jan. 1, 2024) were not required to comply until January 2025. While the injunction remains in place, FinCEN has stated that companies are not obligated to file reports, although voluntary submissions are still accepted.

Proponents of the CTA argue that the law is necessary to address the misuse of anonymous shell companies for illegal activities. The DOJ has defended the reporting requirements as a legitimate exercise of Congress’s authority under the Commerce Clause. However, Accounting Today reported that critics including the Texas Public Policy Foundation (TPPF), argue that the law imposes unconstitutional burdens on small businesses. TPPF general counsel Robert Henneke described the decision as a victory for limited government and individual rights, emphasizing the importance of restricting federal overreach. 

This ruling adds to a growing wave of legal challenges to the CTA. As reported by Trusted Professional, FinCEN and the DOJ continue to defend the law’s constitutionality, emphasizing its role in combating financial crime and ensuring global compliance. For now, the injunction provides temporary relief for affected business while leaving significant uncertainty about the future of the CTA.