A Texas federal court judge issued a nationwide injunction Wednesday, effectively nullifying the controversial Corporate Transparency Act. That rule would have required more than 32 million corporate entities to disclose their “beneficial owners” to the Treasury Department by Jan. 1.

The CTA was intended to help law enforcement better track and combat business misconduct like money laundering, organized crime and terrorism. Supporters say the law was needed to identify bad actors who conduct criminal activity anonymously through their businesses.

Critics contend the rule is federal overreach that places a heavy burden on small businesses.

In his ruling, Judge Amos L. Mazzant of the U.S. District Court for the Eastern District of Texas agreed with plaintiffs who argued the CTA fell outside of Congress’s authority to regulate interstate and international commerce. He called the rule requiring state-registered companies to report to the federal government a “drastic” departure from history.

“For good reason, plaintiffs fear this flanking, quasi-Orwellian statute and its implications on our dual system of government,” Mazzant said.

Non-compliant farmers could have faced jail time

According to an October American Farm Bureau Federation analysis, more than 230,000 farming operations would have been required to submit “beneficial ownership information” to the Treasury Department. Individuals with at least a 25% ownership of the operation as well as those who exercise “substantial control” were subject to the reporting rule. They would have been required to submit documents providing business details, personal information and copies of certain government IDs. They were also required to update the Treasury Department with any changes to their information.

Those who failed to comply with the rule would have faced felony charges and up to two years in jail. They also could have been subject to escalating fines of anywhere from $500 per day to $10,000 per violation.

Farm Bureau officials have strongly opposed regulations requiring farmers to disclose private personal information to the federal government. AFBF President Zippy Duvall notes farmers and ranchers across the country have faced great uncertainly since the Corporate Transparency Act was passed in early 2021. Despite almost four years passing since the rule was enacted, he says there were still many questions regarding which farming operations were required to file as well as who would have access to the submitted information.

“We appreciate the temporary reprieve provided by the injunction and hope Congress can take a cue from the courts in the coming weeks to provide a more permanent resolution to this problematic policy,” Duvall says.

National Cattlemen’s Beef Association Executive Director of Government Affairs Kent Bacus notes Judge Mazzant’s ruling only stops the CTA from going into effect Jan. 1. The case is still working its way through the courts where other judges could rule differently. There are also other legal challenges to the CTA that may eventually lead to higher courts weighing in.

“Across the country, cattle producers are relieved that this mandate is on hold while the law is being considered by the courts,” Bacus says. “NCBA will continue working with Congress to provide a permanent fix to the Corporate Transparency Act that protects family farmers and ranchers.”