A federal appeals court has reinstated a requirement that small businesses file reports disclosing their ownership starting Jan. 1.
The Corporate Transparency Act is likely constitutional, the 5th Circuit Court of Appeals said in a decision Monday. A district court judge issued a nationwide injunction Dec. 3 blocking implementation of the law.
The federal government “has made a strong showing that it is likely to succeed on the merits in defending CTA’s constitutionality,” the court said. “When Congress passed the bipartisan statute in 2021, it used its ‘broad authority under the Commerce Clause’ to regulate economic activity,” the court added, quoting a 2005 Supreme Court decision.
Other factors weighed in favor of granting a stay to lift the injunction, the court said.
“As the government explains, and the district court recognizes, a last-minute nationwide preliminary injunction would undermine our ability to push other countries to reform their anti-money laundering and counterterrorism regimes and to address the most fundamental gap in our own regime,” the court said.
Among the plaintiffs are Mustardseed Livestock, the Libertarian Party of Mississippi and the National Federation of Independent Business.
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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.
AFBF President Zippy Duvall expressed disappointment with the ruling. “It’s clear than many farmers aren’t aware of the filing requirement because of lack of guidance and the government’s poor public outreach,” Duvall said in a statement.
“Farmers were given a reprieve from the filing deadline, but now, just two days before the holidays, when many families take a much-needed break from work responsibilities, the courts have reinstated the requirement. Unfortunately, thousands of farmers may unknowingly miss the deadline, putting their businesses at risk. We urge the government to grant an extension so more family businesses can comply with the rule.”
