A federal judge has issued a nationwide preliminary injunction against a controversial federal law that threatened to impose significant costs on small businesses across the United States. Texas Attorney General Ken Paxton expressed approval of the decision, highlighting its importance for Texas businesses.
The law in question, known as the Corporate Transparency Act, was included in a larger defense bill passed by Congress in 2021 over President Donald Trump’s veto. This act required entities incorporated under state law to disclose personal information about their stakeholders to the Department of the Treasury's criminal enforcement division. The penalties for noncompliance were severe, with fines reaching up to $500,000 and potential jail time of up to 10 years.
Attorney General Paxton criticized the legislation as an overreach by the federal government. “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,” he stated. He also noted his involvement in supporting Texas businesses through an amicus brief filed in the case.
The injunction is seen as a significant win for small business owners nationwide, preventing the law from being enforced.