Legal challenges to the Corporate Transparency Act, an ill-conceived measure meant to thwart money laundering, are mounting.

It is a pernicious piece of legislation that must be overturned by the courts, or repealed by Congress.

Congress inserted the act into the 2021 defense budget, but the law didn’t go into effect until this year. The law applies to corporations with fewer than 20 employees and gross revenue of under $5 million.

As we said in March, no matter its legitimate intent, this measure will likely make more criminals out of honest business people than it will make convicts of narco money launderers.

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.

The Treasury Department estimates the law will cover 32.6 million businesses, which will spend $21.7 billion filing the reports this year. The law is expected to apply to 5 million new businesses every year.

Four lawsuits have been filed against the measure, and suits are pending in Texas, Maine and Michigan.

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. The ruling is under appeal by the Biden administration.

Small Business United 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.

Trade associations, including the American Farm Bureau and National Cattlemen’s Beef Association, have come out opposed to the law, alleging it violates the Constitution in numerous ways.

Attorney Caleb Kruckenberg, who represents the plaintiffs in the Texas lawsuit, said entities that must file reports by the end of the year are just now hearing about the law.

“There’s a lot of concern starting to build,” said Kruckenberg, a lawyer for the nonprofit law firm Center for Individual Rights.

Republicans have introduced bills in Congress to repeal the act. Oregon Sen. Ron Wyden and four other Democrats defended the law in a friend-of-the-court brief as a routine regulation of commerce and foreign affairs.

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.