Nationwide Injunction Blocks Unconstitutional Law That Imposed Massive Costs on Small Businesses

AUSTIN – Attorney General Ken Paxton applauded a major victory for Texas small businesses as a federal judge granted a nationwide preliminary injunction against an unconstitutional federal law that would have imposed major costs on tens of millions of small businesses through illegal and burdensome regulations. Attorney General Paxton filed an amicus brief in the case in support of Texas businesses.

In 2021, the 21-page Corporate Transparency Act was tucked into a sweeping 1,482-page defense bill passed by Congress over President Donald Trump’s veto. Under the law, entities incorporated under state law were forced to disclose the personal information of their stakeholders, including current address, identification documents, and other sensitive information, to the Department of the Treasury’s criminal enforcement arm. Penalties for noncompliance could result in fines of up to $500,000 and 10 years in jail. However, the Constitution does not give Congress the power to unilaterally regulate the approximately 32.6 million organizations that have been granted formal corporate status by the States.

“The so-called ‘Corporate Transparency Act’ was an unconstitutional attempt by the federal government to undermine States’ authority and crush small businesses under regulations, fines, and threats,” said Attorney General Paxton. “I filed an amicus brief supporting Texas small business owners, and it’s a major victory for American entrepreneurs that the nationwide injunction will prevent this law from taking effect.”

To read the amicus brief, click here.

To read the ruling, click here.

###