A federal judge in Texas has issued a nationwide injunction blocking the enforcement of the 2021 Corporate Transparency Act (the “Act”), an anti-money laundering law that requires corporate entities to disclose to the U.S. Treasury Department the identities of their real beneficial owners. U.S. District Judge Amos Mazzant in Sherman, Texas, on Tuesday sided with the National Federation of Independent Business and several small businesses and non-profits by concluding the Act was likely unconstitutional.

Judge Mazzant said the Act was an “unprecedented” attempt by the federal government to legislate in an area traditionally left to the states by monitoring companies created pursuant to state law and ending the anonymity various states provide in the formation of corporations. Judge Mazzant said Congress had no authority under its powers to regulate commerce, taxes, and foreign affairs to adopt the Act and that it likely violated states’ rights under the U.S. Constitution’s Tenth Amendment.

Judge Mazzant blocked the Act’s enforcement ahead of the January 1, 2025 deadline for companies to comply with its requirements. Judge Mazzant’s preliminary injunction will provide small businesses a reprieve while the courts, and very likely the Supreme Court, can consider the constitutional issues raised by the Act’s enactment.