Injunction blocks corporate reporting rule that could have burdened farms

DAILY Bites

• A federal court blocked the Corporate Transparency Act, which required over 32 million entities, including 230,000 farming operations, to report ownership details to the Treasury.

• The judge ruled the act exceeded Congress’s authority, calling it a “drastic” overreach impacting small businesses and state governance.

• Farm and ranch groups applauded the decision, citing the act’s burdens on agriculture and threats to privacy.

DAILY Discussion

A Texas federal court judge issued a nationwide injunction this week, nullifying the contentious Corporate Transparency Act. The rule would have required more than 32 million corporate entities to disclose their “beneficial owners” to the Treasury Department by January 1, 2025.

Designed to combat money laundering, terrorism financing, and other illicit activities, the CTA mandated that businesses report detailed ownership information to the Financial Crimes Enforcement Network, a division of the U.S. Department of the Treasury. However, critics argued the rule imposed disproportionate burdens on small businesses, family farms, and ranches, threatening their operations without effectively addressing financial transparency issues.

In his ruling, Judge Amos L. Mazzant III of the U.S. District Court for the Eastern District of Texas sided with plaintiffs who argued the CTA exceeded Congress’s authority under the Commerce Clause. Mazzant described the rule as a “drastic” departure from historical norms, where state-registered companies were not subjected to federal reporting mandates.

“For good reason, plaintiffs fear this flanking, quasi-Orwellian statute and its implications on our dual system of government,” Mazzant wrote in the 79-page opinion.

The case, Texas Top Cop Shop, Inc. v. Garland, was brought by small businesses and other entities, challenging the act’s constitutionality. Agricultural groups such as the National Cattlemen’s Beef Association and the Texas Farm Bureau played a significant role in opposing the rule. They argued the reporting requirements would impose unnecessary administrative burdens on family-owned operations, many of which already operate on slim margins.

An October analysis by the American Farm Bureau Federation highlighted the scope of the potential impact. According to the report, more than 230,000 farming operations would have been required to submit “beneficial ownership information” to the Treasury Department.

This included individuals with at least a 25 percent ownership stake or those exercising “substantial control” over the business. Farmers would have been required to provide detailed business documents, personal information, and copies of government-issued IDs and to report any changes promptly.

Regan Beck, TFB’s director of Government Affairs, praised the ruling, calling it “a major win for farmers, ranchers, and small businesses.”

Kent Bacus, executive director of government affairs for the National Cattlemen’s Beef Association, emphasized the importance of securing a permanent fix to prevent similar burdensome regulations in the future.

“The Corporate Transparency Act requires millions of family farmers and ranchers to file complex paperwork and disclose beneficial ownership information with the federal government under penalty of severe fines and jailtime,” said Bacus. “Across the country, cattle producers are relieved that this mandate is on hold while the law is being considered by the courts. NCBA will continue working with Congress to provide a permanent fix to the Corporate Transparency Act that protects family farmers and ranchers.”

The injunction halts the CTA’s enforcement while the courts continue to deliberate its legality. For now, the decision provides relief to farmers, ranchers, and small businesses who feared the act’s sweeping requirements. However, the broader debate over balancing financial oversight with protecting small entities remains unresolved, with agricultural groups continuing their advocacy for fair and reasonable regulations.