The Corporate Transparency Act will harm a vast majority of its members, the American Farm Bureau stated in a court filing Monday, joining growing domestic opposition to a law that brings the U.S. closer in line with international anti-money laundering standards.

The Farm Bureau, joined by the National Federation of Independent Business and trade groups representing builders and contractors, filed an amicus brief with the 11th U.S. Circuit Court of Appeals.

The court will hear arguments in mid-September on the law requiring small businesses to submit the photos and personal information of their owners and managers to the federal Financial Crimes Enforcement Network.

Congress adopted the act in 2021, but it didn’t take effect until this year. An estimated 32 million businesses that were formed under state incorporation laws must file their initial reports by the end of this year.

Opposition to the law has grown recently and turned into a partisan issue. Republicans have introduced bills in to repeal the act. The law’s defenders include Oregon Sen. Ron Wyden and other Democrats.

The court received a flurry of amicus briefs, mostly opposing the law, including one Monday from 22 red states, including Idaho, which argue the act usurps the states’ authority to regulate corporations.

“And we are sensitive to the ways burdensome legislation (and its implementing regulations) hurt our residents and small businesses,” the states added.

West Virginia, Kansas and South Carolina took the lead in forming the coalition.

International approval

The law has pleased the Paris-based Financial Action Task Force, created by the G-7 in 1989 to combat organized crime and the financing of terrorism. The task force’s 37 member countries includes the U.S.

Citing the Corporate Transparency Act, the task force in March upgraded the U.S. from “noncompliant” to “largely compliant” in identifying business owners and associates. The files should be readily available to “competent authorities” in foreign countries, according to the task force.

The U.S. worked hard over a decade to earn a better rating from the international body, Treasury Secretary Janet Yellen said in a statement.

“As the world’s largest economy, we have a unique responsibility to safeguard our financial system from criminal exploitation,” she said. 

The Farm Bureau and others argue the reporting requirements go beyond Congress’ authority to regulate commerce.

The U.S. Supreme Court has upheld laws regulating wheat production and milk prices, but has not stretched the Commerce Clause to allow Congress to regulate businesses for merely incorporating, the brief argues.

The National Association of Home Builders and Associated Contractors of America also signed the brief.

“This law places an immense burden on small business owners,” NFIB’s Small Business Legal Center director, Beth Milito, said in statement.

“Not only must they provide their private information to be catalogued, but well-meaning owners can face egregious penalties for any paperwork errors that are mistakenly made,” she said.

A federal judge in Alabama in March ruled the law exceeds Congress’ power to regulate commerce and foreign affairs, but the ruling only applied to members of National Small Business United.

Small Business has invited the appeals court to broaden the lower court’s ruling and strike down the law for violating the Fourth Amendment, which safeguards citizens from unreasonable searches.

Small Business argues forcing millions of presumed-innocent Americans to submit and constantly update personal information to financial crimes investigators amounts to an unreasonable search.