Supreme Court upholds small business ownership reporting rule, sparking debate over privacy and federal overreach
By willowt // 2025-01-30
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  • The U.S. Supreme Court ruled 8-1 to allow enforcement of the Corporate Transparency Act (CTA), a law requiring small businesses to report detailed ownership information.
  • The CTA requires small businesses with fewer than 20 employees and annual revenue below $5 million to disclose owner information, including names, birthdates, addresses and identification numbers, to FinCEN.
  • The CTA's implementation has faced legal challenges, with a federal judge issuing a nationwide injunction in December 2024, only to have it temporarily lifted and reinstated.
  • The case has reignited debates over the use of nationwide injunctions, with Justice Gorsuch criticizing the practice for its potential to undermine judicial processes.
  • The decision has created uncertainty for small businesses, which argue that the law imposes an undue burden and poses risks to privacy and autonomy. Supporters maintain that it is necessary to combat financial crimes.
In a landmark decision, the U.S. Supreme Court voted 8-1 on Jan. 23 to allow the federal government to enforce the Corporate Transparency Act (CTA), a law requiring millions of small businesses to report detailed ownership information to combat money laundering and financial crimes. The ruling, which overturned a lower court’s nationwide injunction, has reignited debates over privacy, federal overreach and the burdens placed on small businesses — the backbone of the American economy. The CTA, enacted in 2021, mandates that small businesses with fewer than 20 employees and less than $5 million in annual revenue disclose the names, birthdates, addresses and identification numbers of their owners to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). Failure to comply could result in fines of up to $591 per day. Justice Ketanji Brown Jackson, the lone dissenter, argued that the government failed to demonstrate sufficient urgency to justify the Supreme Court’s intervention. “However likely the government’s success on the merits may be, in my view, emergency relief is not appropriate because the applicant has failed to demonstrate sufficient exigency to justify our intervention,” Jackson wrote.

A legal rollercoaster for small businesses

The CTA’s implementation has been anything but smooth. On Dec. 5, 2024, a federal judge in the Eastern District of Texas sided with challengers, issuing a nationwide injunction against the law, citing concerns over its constitutionality. The injunction was temporarily lifted by the Fifth Circuit Court of Appeals on Dec. 23, 2024, only to be reinstated days later. The Supreme Court’s recent decision allows the law to take effect while the Fifth Circuit reviews its constitutionality. Oral arguments are scheduled for March 25. For small business owners, the back-and-forth has created significant uncertainty. “This decision creates even more uncertainty for the millions of small businesses we represent,” said Todd McCracken, president and CEO of the National Small Business Association (NSBA). “I cannot stress enough what a major problem this back-and-forth is and the massive uncertainty it creates for the millions of small businesses across this country.”

The broader implications of nationwide injunctions

The case has also reignited a long-standing debate over the use of nationwide injunctions, which allow a single federal judge to block a law or policy across the entire country. Justice Neil Gorsuch, who concurred with the majority, has been a vocal critic of such injunctions. “The real problem is the increasingly common practice of federal court judges ordering injunctions of ‘nationwide,’ ‘universal,’ or ‘cosmic’ scope,” Gorsuch wrote in a 2020 opinion. He argued that these injunctions raise “serious questions about the scope of courts’ equitable powers under Article III” of the Constitution. Gorsuch’s concerns echo those of other conservative legal scholars, who argue that nationwide injunctions undermine the judicial process by allowing plaintiffs to “shop” for favorable courts and creating chaos in the legal system.

Small businesses caught in the crossfire

For small business owners, the CTA represents yet another regulatory hurdle in an already challenging economic environment. Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council, called the law “a go-stop-go story” that has left business owners scrambling to comply. “At this point in time and with the cloud of uncertainty still hanging over CTA’s legality, we are urging President Trump to step in and provide immediate penalty relief for late filers, of which there are likely millions of small business owners,” Kerrigan said. Supporters of the law, however, argue that it is a necessary tool to combat financial crimes. “For years, police and prosecutors have tried to combat a flood of dirty money associated with often violent crimes, but that can’t happen if they run into a wall of shell companies and secrecy,” said Ian Gary, executive director of the FACT Coalition.

Historical context: A balancing act

The CTA is part of a broader effort to modernize anti-money laundering laws, which have remained largely unchanged since the 1970s. Proponents argue that the law is essential for preventing the use of anonymous shell companies to launder money, finance terrorism and evade taxes. Critics, however, contend that the law places an undue burden on small businesses, which account for nearly half of U.S. economic activity and employ nearly 60 million Americans. They argue that the CTA’s reporting requirements are overly intrusive and could expose business owners to identity theft and other risks. As the legal battle over the CTA continues, small business owners are left in limbo, caught between the need for transparency and the desire to protect their privacy and autonomy. The outcome of this case could have far-reaching implications not only for small businesses but also for the broader debate over the balance between federal authority and individual rights. For now, the Supreme Court’s decision ensures that the CTA remains in effect, but the final chapter of this legal saga has yet to be written. As Justice Gorsuch aptly noted, “What in this gamesmanship and chaos can we be proud of?” The answer, for millions of small business owners, remains unclear. Sources include: ZeroHedge.com EpochTimes.com APNews.com
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