WASHINGTON, D.C. – The New Civil Liberties Alliance (NCLA) has filed an amicus curiae brief in Texas Top Cop Shop v. Bondi, urging the U.S. Court of Appeals for the Fifth Circuit to uphold a preliminary injunction against enforcement of the Corporate Transparency Act (CTA). This action follows the U.S. Department of the Treasury’s announcement that it will not enforce the CTA against U.S. citizens and companies, aligning largely with the injunction’s intended outcome.
The CTA requires organizations incorporated under state law to submit detailed reports, including sensitive information, to the Department of the Treasury. Failure to comply, whether by omission or accidental errors, could result in civil or criminal penalties. The law affects an estimated 30 million nonprofit and for-profit entities nationwide.
The U.S. District Court for the Eastern District of Texas previously issued a preliminary injunction against the CTA, citing constitutional concerns. The federal government has appealed, arguing that the law is justified under the Constitution’s Commerce Clause, which grants Congress authority to regulate economic activity. However, the NCLA contends that incorporation alone does not constitute economic activity and therefore falls outside Congress’s regulatory power under the Commerce Clause.
Additionally, the government has requested that if the Fifth Circuit does not vacate the injunction, it should at least be narrowed to apply only to the corporate entities that brought the lawsuit. The NCLA argues against this limitation, stating that the Administrative Procedure Act allows courts to postpone enforcement of a regulation nationwide.
Sheng Li, Litigation Counsel for NCLA, asserted that the government’s reasoning could lead to an overreach of regulatory authority, stating, “If status as a commercial actor could be the basis for regulation under the Commerce Clause, then that power would be boundless, and any notion of limited government would cease.”
The Fifth Circuit’s ruling on the case could have significant implications for the scope of federal regulatory power over businesses and nonprofit organizations across the country.
