A federal judge in Texas has blocked the federal government from requiring small businesses, including farms, to start filing reports disclosing their ownership.
U.S. District Judge Amos L. Mazzant of the Eastern District of Texas said in his ruling issued Tuesday that the Corporate Transparency Act was likely unconstitutional. The disclosure requirement, which the judge described as “quasi-Orwellian,” is intended to combat money laundering and other financial crimes.
The deadline for businesses to file the disclosure reports with the Financial Crimes Reporting Network, a Treasury Department agency known as FinCEN, is Jan. 1.
More than 230,000 farms were expected to have to file reports, the American Farm Bureau Federation estimates. The requirements have affected farms operated as LLCs, including those with a single member, as well as limited partnerships and S and C corporations.
Mazzant enjoined enforcement of the law nationwide.
“Though seemingly benign, this federal mandate marks a drastic two-fold departure from history,” the judge wrote.
“First, it represents a federal attempt to monitor companies created under state law — a matter our federalist system has left almost exclusively to the several States. Second, the CTA ends a feature of corporate formation as designed by various States — anonymity.”
He said the Justice Department had failed “to provide the Court with any tenable theory that the CTA falls within Congress’s power. And even in the face of the deference the Court must give Congress, the CTA appears likely unconstitutional.”
The six plaintiffs in the case included Mustardseed Livestock of Lingle Wyo., described as an LLC that has operated a small dairy farm since 2020.
AFBF President Zippy Duvall welcomed the judge's ruling. “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. Questions are swirling about who is required to file and who will have access to the confidential data being collected," he said in a statement.
