On Tuesday, February 13, 2025, U.S. District Judge Jeremy Kernodle, based in Tyler, Texas, lifted an injunction that had temporarily halted the enforcement of the Corporate Transparency Act (CTA). The ruling clears the way for millions of business entities to comply with the law, which mandates that they disclose the identities of their real beneficial owners to the U.S. Treasury Department.
The decision follows Judge Kernodle’s earlier ruling in January 2025, in which he had declared the CTA unconstitutional, citing that it unduly regulated private companies formed under state law, regardless of their involvement in interstate commerce. However, in his latest ruling, Judge Kernodle noted that the U.S. Supreme Court had intervened after he issued his January decision. The Supreme Court had paused an injunction from another federal judge, U.S. District Judge Amos Mazzant of Texas, who had similarly ruled the law unconstitutional. This pause had left the law’s enforcement temporarily blocked.
In Tuesday’s order, Kernodle allowed the law’s enforcement to proceed while the U.S. Department of Justice (DOJ) appeals his January ruling. The DOJ’s appeal challenges Kernodle’s declaration that the CTA is unconstitutional, and the government intends to continue pressing for the law’s full implementation.
The Corporate Transparency Act, passed in 2021, requires corporations and limited liability companies (LLCs) to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury Department. FinCEN is tasked with collecting and analyzing financial transaction data to combat money laundering, terrorist financing, and other financial crimes. This law has been seen as a major step toward increasing transparency in U.S. corporate structures, which have often been used for illicit purposes due to the lack of owner disclosure requirements.
The Trump administration had previously moved to reevaluate the CTA’s implementation, arguing that certain low-risk entities should be exempt from the reporting requirements. In response, the Treasury Department indicated it would extend the deadline for entities to comply with the law by 30 days, to give the department time to potentially adjust reporting obligations.
The ruling was met with opposition from the plaintiffs in the case, which include two corporate entity owners represented by the conservative Texas Public Policy Foundation. The plaintiffs argued that the law should remain on hold until the 5th U.S. Circuit Court of Appeals, based in New Orleans, and potentially the U.S. Supreme Court, could weigh in on its constitutionality. The plaintiffs raised concerns over what they viewed as an overreach of federal power under the law.
At this point, the case remains ongoing, and it will ultimately be up to the higher courts to determine the fate of the Corporate Transparency Act.
This decision marks a key moment in the broader legal and regulatory debate over the balance of power between federal and state authority in regulating business entities. As the appeals process unfolds, the final ruling could have significant implications for the future of corporate transparency laws in the United States.
Lawyers for both FinCEN and the plaintiffs declined to comment immediately following the decision.
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