NACS Fights to Stop Corporate Transparency Act Requirement

Following a recent Texas court case, NACS filed a brief in support of the act remaining blocked.

December 19, 2024

NACS, along with the National Retail Federation (NRF) and the Restaurant Law Center, filed an amicus brief this week in an attempt to ensure that small businesses don’t have to meet “complex and invasive” filing requirements. The brief follows a district court case (Texas Top Copy Shop v. Merrick Garland, Attorney General of the United States) ruling from earlier this month, when a Texas court blocked the Corporate Transparency Act nationwide.

NACS and its partners argued in favor of the injunction put in place earlier this month. If NACS prevails, the act would remain blocked.

The original regulation requires certain U.S. entities and foreign entities registered to do business in the United States to submit beneficial ownership information (BOI) reports to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). For small businesses, these reporting requirements require a significant amount of complex paperwork that is burdensome to meet.

[NACS explained the implications of the new rule earlier this year.]

In Top Copy Shop v. Garland, plaintiffs alleged the CTA represents an unconstitutional expansion of federal power, threatens privacy and associational interests, and violates individual rights. The Court agreed with the plaintiffs, finding they were likely to prevail on their argument that the CTA exceeded Congress’ enumerated powers, declining to reach the other grounds for challenge.

The U.S. government has asked for the rule to be reinstated on an emergency basis. That would mean businesses would have to file the BOI reports by January 1st. NACS argued that such a sudden shift would put businesses in a difficult situation and that many would be unable to meet the deadline. And, NACS maintained that the injunction was correct and the law should not be enforced.

NACS’ brief states:

Staying the injunction would have irreversible negative repercussions for small businesses throughout the nation.

The public faces a compliance deadline of January 1, 2025—a mere two weeks away—which the District Court suspended through its granting of Appellants' Motion for Preliminary Injunction. Given that imminent deadline, which businesses across the nation no longer think applies to them, the practical implications of Appellants' demand to stay the injunction is severe. If the Government's Motion is granted, Appellees and the public subject to the CTA and Reporting Rule will be required to comply with the reporting obligations by January 1st or face the potential civil penalties up to $10,000 or imprisonment up to two years. Small businesses who have deferred their compliance obligations in light of the injunction could therefore be confronted with potential imprisonment in the new year.

The Fifth Circuit Court of Appeals is expected to rule on the government’s emergency motion before the end of the year.