American businesses have been experiencing whiplash over the status of the Corporate Transparency Act. In early December of last year, Judge Amos L. Mazzant's preliminarily enjoined the CTA and its implementing regulations. Texas Top Cop Shop, Inc. v. Garland, 2024 WL 5049220 (E.D. Tex. Dec. 5, 2024). Judge Mazzant then denied the government's motion to stay the preliminary injunction pending an appeal. Texas Top Cop Shop, Inc. v. Garland, 2024 WL 5145951 (E.D. Tex. Dec. 17, 2024). Next, the motions panel of the Fifth Circuit stayed that injunction. Texas Top Cop Shop, Inc. v. Garland, 2024 WL 5203138 (5th Cir. Dec. 23, 2024. ) Days later, a merits panel of the same Circuit Court vacated the stay and reinstated the universal injunction. Texas Top Cop Shop, Inc. v. Garland, 2024 WL 5224138 (5th Cir. Dec. 26, 2024). The merits panel issued a briefing schedule under which briefing will be completed by February 28, 2025 and scheduled oral argument for March 25, 2025. The net effect of these several volte-faces is that the CTA is enjoined as of today's posting date.

However, the government on December 31st applied to the United States Supreme Court for a stay of Judge Mazzant's preliminary injunction. Garland v. Texas Top Cop Shop, Inc., S. Ct. Case No. 24-40792. Justice Alito has requested that a response be filed by tomorrow afternoon.

The government's application makes the astounding claim that the CTA imposes only "minimal burdens on the respondents". That assertion is hard to credit given that the Financial Crimes Enforcement Network estimated that 32.6 million business entities would incur costs totaling 21.7 billion dollars. Perhaps, the government meant that the burden was minimal only with respect to the actual respondents in the case (i.e., the one individual and five private entities that are the plaintiffs in the underlying action). However, that would be turning a blind eye to the many millions of reporting companies and beneficial owners that FinCEN admits are subject to the CTA. In a notable omission, the government's application fails to apprise the court of the level of compliance, which I have been told has been very low for businesses formed before January 1, 2024. If this is the case, then the lifting of the preliminary injunction could have a massive, nationwide impact.

The government points out that "FinCEN has provided specific examples that illustrate how criminals use shell companies to conceal their crimes". While that may be the case, it does not explain why those criminals would comply with the CTA even while violating anti money-laundering and other laws.

Finally, the timing of the government's application is suspect, coming just weeks before the new administration takes office. In deference to the democratic process, the new administration should be given the opportunity to evaluate whether to apply for a stay.