On January 23, 2025, Law360 quoted Kevin Shepherd on the challenges facing the Corporate Transparency Act (CTA).
According to the article, federal judges are examining the CTA, which aims to reduce crimes involving shell companies. This scrutiny comes in response to approximately a dozen complaints challenging the law's constitutionality over the last two years. These regulations would have required small companies to disclose their beneficial owners to the federal government by January 1. However, enforcement of the rules was stopped by the recently issued nationwide injunction.
The district courts are split on the CTA. A Law360 review of court filings shows three have issued injunctions, three have dismissed complaints, four have yet to issue decisions, and one has issued a stay. The Fifth Circuit even disagreed among its own judges: the court's motions panel had stayed the injunction at issue at the high court, before its merits panel reinstated it days before the deadline to file.
The government has argued, across various jurisdictions, that the law is justified by four areas of the Constitution, including the Commerce Clause, which gives federal lawmakers the power to regulate economic activity.
Commenting on how the courts will rule, Shepherd said, “The Eleventh Circuit is expected to rule on the merits of the law itself, while the Fifth Circuit is only tasked with deciding whether the injunction is appropriate.” He sees the question of whether Congress's enactment of the CTA was justified by the Commerce Clause as carrying the most weight. "The Commerce Clause seems to take the center stage," Shepherd said.
Remarking on what the Department of Justice will do if the courts decide to keep the law blocked, Shepherd told Law360 that he is skeptical of the notion that Trump's DOJ wouldn't appeal. He pointed to Trump's statement regarding the veto, which doesn't reference the shell company law at all.