The S Corporation Association filed an Amicus brief yesterday in support of the nationwide injunction on enforcement of the Corporate Transparency Act.
With the filing deadline just days away, and millions of covered businesses not having yet filed, the importance of keeping this injunction in place cannot be overstated – a concern that is compounded by the fact that the 1-year delay provision moving through Congress is now stalled as lawmakers fight over the contents of the year-end spending bill.
Yesterday’s brief, filed on behalf of the S Corporation Association and the Private Investor Coalition, makes the case for keeping the injunction in place, giving millions of businesses more time to learn about this new filing requirement, and giving the courts time to rule that the CTA is unconstitutional.
Why all the fuss? The CTA is the most aggressive, unrestrained data grab in American history. As the brief notes:
No other federal information-collection statute presents comparable privacy risks. Other kinds of personal information given to the federal government are protected by the Privacy Act of 1974, which generally precludes the Government from using information collected for one reason for incompatible purposes. Personal information given to federally regulated financial institutions is likewise protected under the Right to Financial Privacy Act of 1978, which generally requires the Government to obtain a warrant, subpoena, or other form of process before it can access a citizen’s personal information without their consent. Tax information collected by the Government is protected under the Internal Revenue Code, which generally requires a court order before the IRS may share information with non-tax enforcement agencies.
The CTA provides no similar panoply of protections. If the Government obtains a stay or a narrowing of the District Court’s injunction, the Amici’s members and millions of other American citizens and businesses will be forced to hand over private information for a criminal-investigation database that can be accessed by any federal agency and many foreign, state, and local governments and their agencies. The privacy bell will be incapable of being un-rung.
The recent Texas ruling joined the Northern District of Alabama decision from last March in casting doubt that the CTA falls within the government’s constitutional authority. We may soon have a third court weigh in. As Law360 notes:
A federal judge in Michigan said new disclosure requirements for small businesses seem burdensome and intrusive during a Monday hearing focused on the privacy implications of the currently blocked anti-money laundering law….
During a hearing in a separate legal challenge to the CTA, U.S. District Judge Robert J. Jonker said he was troubled by both the “massive amount” of information the government was seeking from small businesses and that the government was requiring the disclosure of nonpublic information to assist in criminal investigations without the need for a warrant.
“It invites the conclusion that the main purpose of the whole act is to get around the Fourth Amendment,” Judge Jonker said.
So the case against the CTA is gathering momentum. S-Corp is confident the constitutional challenges raised against the CTA will ultimately prevail, but that will take time and the CTA’s filing deadline is in two short weeks.
With the legislated delay in jeopardy and the 11th Circuit appeal still pending, the Texas injunction may be the last opportunity to protect the privacy of millions of business owners. As the judge in Michigan notes, once that data is collected, there’s no going back.