AUSTIN – The United States District Court for the Eastern District of Texas issued a preliminary injunction and nationwide stay yesterday halting the enforcement of the Corporate Transparency Act (CTA). In a scholarly opinion, Judge Jeremy D. Kernodle held the law likely exceeds federal authority—finding that the government’s theory of government power was “unlimited” and its actions were likely unconstitutional.
The CTA, passed as part of the National Defense Authorization Act in 2021, would have required millions of law-abiding Americans to disclose personal sensitive information to a federal law enforcement database, simply because they hold property under state corporate forms like LLCs.
The Texas Public Policy Foundation represents two property owners challenging the CTA. They argue that the law violates federal Commerce Clause powers under the United States Constitution and undermines the principles of limited government and individual liberty. The decision marks a major victory for Texas and for those who defend constitutional principles.
TPPF General Counsel Robert Henneke praised the ruling, saying, “The court’s decision affirms the principle that federal government power is not unlimited. This ruling is a powerful reminder that our Constitution limits federal power to protect individual rights and economic freedom.”
Chance Weldon, Director of the Center for the American Future at TPPF, echoed Henneke’s remarks:
“The government’s theory of power in this case was effectively unlimited. The district court’s opinion is not only a win for our clients, but ordinary Americans everywhere.”
The preliminary injunction halts the immediate implementation of the CTA, providing relief to small businesses across Texas and signaling the law’s shaky constitutional grounds. This decision ensures that ordinary Americans are not subject to burdensome reporting requirements that violate their constitutional rights, just because they own an LLC.
To read the opinion and order granting motion for preliminary relief, click here.
For additional background on the case, click here.
Texas Public Policy Foundation is a non-profit free-market research institute based in Austin that aims to foster human flourishing by protecting and promoting liberty, opportunity, and personal responsibility. The Center for the American Future defends the Constitution through legal opposition to government overreach. The Center launches legal challenges at the administrative, district, and appellate court levels on behalf of ordinary people whose lives, liberty, and property are threatened by government action in defiance of the Constitution.
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