The U.S. Supreme Court voted 8–1 on Jan. 23 to allow the federal government to enforce an anti-money laundering law that a lower court blocked late last year.
Justice Ketanji Brown Jackson dissented from the new ruling.
The statute at issue, the federal Corporate Transparency Act (CTA), required millions of business entities to file information returns about their owners by Jan. 1, 2025.
According to a Treasury website, an estimated 33 million small businesses face fines of as much as $591 per day if they fail to comply with the new rule.
Businesses with upwards of 20 employees, $5 million in annual sales, and a U.S. office qualify for exemptions from CTA reporting requirements.
The law provides that affected corporate entities must file reports with the federal government about their beneficial owners, which means individuals with substantial control over the entity or who own or control 25 percent of the entity.
Entities are required to provide the government with the names of their beneficial owners, along with their birthdates, addresses, and identifying information such as passport or driver’s license numbers.
The CTA’s reporting requirement was put on hold on Dec. 5, 2024, when the U.S. District Court for the Eastern District of Texas sided with challengers, granting a nationwide preliminary injunction—also known as a universal injunction—against the CTA.
The court found that the challengers would likely succeed with their claim that the act was unconstitutional.
On Dec. 13, 2024, the U.S. Department of Justice, acting on behalf of the Financial Crimes Enforcement Network (FinCEN), a federal agency, asked the U.S. Court of Appeals for the Fifth Circuit to stay the injunction.
The agency argued the law was constitutional and that the challenge to it would probably fail in the end.
The circuit court’s motions panel granted the government’s request on Dec. 23, 2024, and suspended the injunction pending appeal. FinCEN then extended the filing deadline for corporate entities to Jan. 13, 2025.
On Dec. 26, 2024, the circuit court performed an about-face and sent the case to its merits panel, which restored the injunction to “preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments.”
The new Supreme Court order states that the Fifth Circuit”s ruling upholding the injunction is “stayed pending the disposition of the appeal” in the circuit court.
The Fifth Circuit has scheduled oral argument in the case for March 25.
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