Court suspends reporting requirements for small businesses

A Texas court on Tuesday blocked the government from enforcing a law requiring certain businesses to disclose owners’ personal information by January 1, 2025, determining it’s “likely” unconstitutional. 

Why it matters: The law, known as the Corporate Transparency Act (CTA), would have affected 32 million businesses nationwide — those with fewer than 20 employees or less than $5 million in annual revenue. 

Zoom in: The CTA, enacted in January 2024, required qualifying businesses to submit “beneficial ownership reports” — personal information filings of all owners holding more than a 25 percent stake — to the Treasury Department by January 1, 2025.  

The big picture: The law aimed to crack down on illegal activities, including money laundering, by collecting more information on certain companies. 

“[The]… expectation of receiving over 32 million such reports annually attests to the CTA’s excessive reach and the impracticality of its enforcement,” wrote Barton James, CEO of ACCA, earlier this year.  

• “The law’s effectiveness is further doubtful as it relies on self-reporting by the very individuals it seeks to regulate,” he added. 

What’s happening: Following a months-long lawsuit, the court ruled on Tuesday that enforcing the law would harm companies and prohibited the government from implementing it nationwide.

Yes, but: The ruling is temporary, and the federal government has yet to respond.

What’s next: According to the court, “Reporting companies need not comply with the CTA’s January 1, 2025, [beneficial ownership] reporting deadline pending further order of the Court.”