A court gavel

A federal judge in Texas issued a nationwide injunction Tuesday against the Corporate Transparency Act, ruling Congress overstepped its powers in passing a law supporters say will fight high-level crimes.

In a 79-page opinion, U.S. District Judge Amos Mazzant in Eastern Texas said neither Congress’ power to regulate commerce nor to conduct foreign affairs justified the act.

The ruling puts on hold a law that applies to an estimated 32 million businesses. The act requires owners and people with substantial control over businesses to submit photos and personal information to the federal Financial Crimes Enforcement Network.

The first reporting deadline was Dec. 31. The government argues the reports will help U.S. and foreign law enforcement agencies uncover shell companies fronting for drug smuggling, human trafficking and other crimes.

The American Farm Bureau and R-CALF are among the many organizations and individuals participating in several federal lawsuits around the country, claiming the law tramples civil liberties.

“This is far from over, but we’re thrilled with the decision today,” said Caleb Kruckenberg, litigation director of the Center for Individual Rights, which represents the plaintiffs in the Texas lawsuit.

An Alabama judge earlier this year also ruled the act unconstitutional, but limited a preliminary injunction to members of the National Small Business Association. Mazzant’s ruling is the first to apply nationwide.

“This is a big move by a judge,” Kruckenberg said.

Mazzant ruled the Texas plaintiffs are likely to successfully argue the act violates the 10th Amendment, which limits Congress’ powers to those delegated to it in the Constitution.

States register corporations, not the federal government, Mazzant stated. If it stands, the reporting law would substantially expand Congress’ powers to regulate commerce, he stated.

“For good reason, plaintiffs fear the flanking, quasi-Orewellian statute and its implications for our dual system of government,” the opinion reads.

“If the court were to sanction such an extension of legislative power today, then there is no telling how Congress would control companies tomorrow,” Mazzant wrote.

The judge did not address whether the act violates the First and Fourth amendments. Opponents of the act argue it infringes on freedom of association and freedom from unreasonable searches and seizures.

Oregon attorney Julie Parrish, who represents Oregon business owners in another suit against the act, said she hopes a judge will rule whether the act infringes on civil liberties.

“We still believe the First and Fourth arguments deserve to have a full-tilt analysis,” she said. “What’s lost if it doesn’t happen is that Congress can enact some other version of it.”

U.S. District Judge Michael Simon in Portland denied a motion in September to issue a preliminary injunction against the act. Simon deferred to Congress, which he said passed the law to fight crime.

Parrish and other attorneys, including from the Center for Individual Rights, have appealed Simon’s decision to the 9th Circuit Court of Appeals. “I’m still hopeful we’ll get a robust discussion out of the 9th Circuit,” she said.

The U.S. government appealed the Alabama court decision to the 11th Circuit Court of Appeals. The appeals court held oral arguments, but has yet to rule.