The U.S. Supreme Court granted a stay Jan. 23 in the case of James McHenry III, Acting Attorney General, et al. v. Texas Top Cop Shop, Inc., et al., allowing the federal government to enforce the Corporate Transparency Act, which went into full effect on Jan. 1.
The law, which aims to prevent and combat money laundering, terrorist financing, tax fraud and other illicit activities, required compliance from existing companies by the start of 2025. Companies formed in 2024 received a 90-day filing deadline, while companies formed this year will only receive 30 days.
The law, which was passed in 2021, was enjoined by the U.S. District Court for the Eastern District of Texas in an amended order on Dec. 5, 2024.
The application for stay was presented to Justice Alito. Justice Neil Gorsuch concurred, and he wrote that the government was entitled to a stay of the district court’s injunction. He also would go a step further and take up the case now to resolve definitely the question of whether a district court may issue universal injunctive relief.
Justice Ketanji Brown Jackson dissented from the grant of the stay. She wrote that regardless of how likely the government’s success on the merits may be, emergency relief in this case was not appropriate because the applicant has failed to demonstrate sufficient exigency to justify the high court’s intervention.
Jackson noted that because the 5th Circuit Court of Appeals expedited its review and the government deferred implementation of the act for four years on its own accord, there was no need for the court to step into the case. She added that the government provided no indication that a more serious or significant injury would occur if the implementation was further delayed by the litigation in the lower courts. She would deny the application and permit the appellate process to run its course.