A federal judge in East Texas is considering arguments from the government asking that he lift a nationwide preliminary injunction against the Corporate Transparency Act.

He should let it stand as challenges to the law are heard by the 5th U.S. Circuit Court of Appeals, and probably eventually by the U.S. Supreme Court.

The act must be struck down.

Congress passed the act in 2021 to provide the Treasury Department with tools to catch drug cartels and other criminals who are using small businesses to launder their illicit profits.

The law applies to corporations with fewer than 20 employees and gross revenue of under $5 million. It would ensnare many family farms and ranches.

Under the law, all persons who own at least 25% of a small business or have “substantial influence” must submit to the Treasury Department’s financial crimes unit their full legal name, date of birth and physical address, and a copy of an official photo identification, such as a driver’s license.

Those who meet the requirements but fail to report could face fines of $500 a day, up to $10,000, and two years in prison. Initial reports are due Jan. 1, 2025. Any changes of a person’s status must be reported within 30 days.

No one knows how much money is laundered in the U.S. each year, but the government says criminals are exploiting gaps in reporting regulations and increasingly sophisticated methods to launder money. Hence the need to cast a wider net.

The government’s net is expected to initially ensnare 32.6 million businesses into its regulatory scheme, and 5 million new businesses every year after. The Treasury Department estimates that businesses will spend $21.7 billion filing the reports this year.

We’ve said it before, but it bears repeating. The Corporate Transparency Act is a tyranny that will likely make more criminals out of honest farmers and ranchers than it will make convicts of narco money launderers.

U.S. District Judge Amos Mazzant issued the nationwide injunction Dec. 3, ruling the law was likely unconstitutional because it exceeded Congress’ power to regulate commerce, manage foreign affairs or collect taxes.

The government appealed his ruling to the 5th Circuit, and has asked that the stay be lifted while the appeals court considers the case, a process that could take months.

The law is an insidious encroachment on the liberty of law-abiding U.S. citizens not suspected of anything.

Where no money laundering is found, federal agents might well discover an owner or person with “significant influence” who has become an unwitting felon by inadvertently not filing.

It must not stand.