U.S. appeals nationwide injunction against corporate reporting law

Published 9:15 am Monday, December 9, 2024

The U.S. Justice Department has appealed a nationwide injunction against the Corporate Transparency Act, claiming a Texas judge made errors in ruling the law is unconstitutional.

The department filed the appeal Friday with the 5th U.S. Circuit Court of Appeals, hoping to reinstate a law the Treasury Department argues will help law enforcement agencies uncover money-laundering schemes.

Federal government attorneys also filed a notice with the 11th U.S. Circuit Court of Appeals briefly outlining its objections to the Texas ruling. The government urged the court, which was already considering the law, to reverse U.S. District Judge Amos Mazzant in Eastern Texas.

Mazzant ruled Dec. 3 Congress can’t make small businesses owners, directors and top employees submit their photos and personal information to the federal Financial Crimes Enforcement Network.

Before Mazzant’s injunction, an estimated 32 million businesses and some nonprofits were required to file reports by Dec. 31. The government argues the law is needed to uncover shell companies fronting for criminal activities.

Lawsuits challenging the act are pending in courts across the country. The American Farm Bureau filed a friend-of-the-court brief opposing the law. Farm Bureau President Zippy Duvall said he hoped Congress will take a cue from Mazzant’s ruling.

“Farm Bureau has long fought against the mandated disclosure of farmers’ private business information to the federal government in a number of different scenarios,” Duvall said in a statement.

The act requires millions of farmers and ranchers to file complex paperwork under the threat of severe fines and jail time, National Cattlemen’s Beef Association executive director of government affairs Kent Bacus said.

“Across the country, cattle producers are relieved that this mandate is on hold while the law is being considered by the courts,” he said in a statement.

So far, courts have split on the act’s constitutionality. Mazzant and a judge in Alabama earlier this year ruled the act unlawful, while judges in Oregon and Virginia upheld it. Mazzant was the first to issue a nationwide injunction.

Mazzant, appointed to the federal bench by Barack Obama, ruled there was nothing in the Constitution that allowed Congress to compel corporations to turn over personal information.

The judge rejected arguments the law is necessary to regulate commerce, foreign affairs or tax collections. The act is a law enforcement tool triggered by an entity registering with a state, Mazzant said.

While government can regulate activities, it can’t regulate a corporation for just “existing,” he said. Mazzant did not address whether the law violates civil liberties.

U.S. attorneys appealed the Alabama ruling to the 11th Circuit. The law also has been pushed up to the 9th Circuit. If circuit courts disagree, the U.S. Supreme Court will have at least one reason to take up the case.

In the comments to the 11th Circuit, U.S. Attorney Steven Hazel said Mazzant was wrong to conclude the law doesn’t regulate any activity. The law regulates businesses that engage in commercial activities, Hazel stated.

The Texas plaintiffs also didn’t show the law was unconstitutional in all the ways it could be applied, according to Hazel.

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