Justice Department Requests Supreme Court to Reinstate Beneficial Ownership Reporting Regulation

On December 31, 2024, the Department of Justice (DOJ) petitioned the U.S. Supreme Court for an emergency order to revive a federal anti-money laundering statute that had been blocked by lower courts weeks prior.

This statute, referred to as the federal Corporate Transparency Act (CTA), mandated millions of business entities to submit information returns regarding their owners by January 1, 2025.

The law requires affected corporate entities to file reports with the federal government disclosing their beneficial owners, defined as individuals who hold significant control over the entity or possess at least 25% ownership. Entities must provide the government with the names of their beneficial owners, in addition to their birthdates, addresses, and identification details like passport or driver’s license numbers.

The CTA’s reporting requirement was suspended on December 5, 2024, when the U.S. District Court for the Eastern District of Texas ruled in favor of the challengers, issuing a nationwide preliminary injunction against the CTA. The court concluded that the challengers were likely to prevail in their argument that the act is unconstitutional.

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On December 13, 2024, the DOJ, representing the Financial Crimes Enforcement Network (FinCEN), requested the U.S. Court of Appeals for the Fifth Circuit to stay the injunction. The agency contended that the law is constitutional and that the challenge against it is likely to fail.

The circuit court’s motion panel granted the government’s request on December 23, 2024, lifting the injunction while the appeal is pending. FinCEN subsequently extended the filing deadline for corporate entities to January 13, 2025.

However, on December 26, 2024, the circuit court reversed its position, assigning the case to its merits panel and reinstating the injunction to “preserve the constitutional status quo while the merits panel evaluates the substantive arguments from both parties.”

The following day, the circuit court set the date for oral arguments in the case for March 25, 2025.

The new emergency application was directed to Justice Samuel Alito, who manages urgent appeals from the Fifth Circuit.

It remains uncertain when the Supreme Court will respond to the application.

In the application, U.S. Solicitor General Elizabeth Prelogar argued that the Supreme Court should either revoke the district court’s injunction or, at the very least, narrow its impact.

Prelogar emphasized that the CTA’s reporting mandates “are crucial for the government in preventing, detecting, and prosecuting crimes such as money laundering, tax fraud, and terrorist financing.”

She asserted that the law’s requirements fall well within congressional authority.

Additionally, Prelogar noted that in 2024, two other federal district courts “rejected preliminary injunction motions that raised substantially similar constitutional claims,” while a third denied such an injunction on the grounds that the plaintiffs did not prove that the continued application of the law would cause harm.

Although a fourth federal district court ruled that the CTA violates the Constitution, its injunction was not applied nationwide and only pertained to the parties involved in that specific lawsuit. That decision is currently under appeal in the U.S. Court of Appeals for the Eleventh Circuit.

Prelogar asserted that disallowing the government to enforce the CTA “hinders efforts to prevent financial crime and safeguard national security.”

The Epoch Times has reached out to both the DOJ and the attorneys representing the challengers, Christian Clase and Caleb Kruckenberg of the Center for Individual Rights in Washington, for comment.

No responses had been received by the time of publication.

Tom Ozimek contributed to this report.