Thomas Lee Quoted in American Banker on Upcoming Supreme Court Ruling on Corporate Transparency Act

Thomas Lee was quoted in American Banker on the future of the Corporate Transparency Act (CTA) as the Supreme Court decides whether a nationwide injunction against enforcement will be put in place.

In November 2022, Thomas was part of the Hughes Hubbard team that represented the National Small Business Association in the first challenge to the constitutionality of the CTA, which would require small business owners to submit detailed personal information.

Speaking to American Banker, Thomas said the lawsuit was brought on behalf of small businesses that felt the CTA was government overreach.

“At the time, people were concerned about the CTA, but no one had really brought litigation,” Thomas said. “Our view was the statute is completely unprecedented, because the federal government has never required this level of disclosure with respect to companies, LLCs, and other entities that are set up under state laws.”

The article goes on to discuss the initial case, including the questions it raised around whether the CTA exceeds Congress’ constitutional remit under the commerce clause and violates individual liberties.

“We filed the lawsuit in November 2022 [and] asked for expedited briefing,” Thomas said. “We didn’t get a final decision out of the district court until March of 2024 and we won. So, this was not a preliminary injunction, this was fully briefed.”

The decision in March quicky gained national attention, which sparked a wave of similar lawsuits.

“They made precisely the same arguments [that I did],” Thomas said. “Lo and behold, seven months later, they get the preliminary injunction out of the judge in Texas.”

In the article, Thomas emphasized the case is still in the preliminary injunction phase, meaning the courts have only reviewed emergency arguments and will fully consider the merits later.

“That case is in a preliminary injunction posture, which means that the briefing was all based on [the idea that ‘this] is an emergency, we think we have enough for you to stop it right now and let’s wait until later to fully hear the merits.’ But my case has been fully briefed,” Thomas said. “The government appealed to the 11th Circuit, and we negotiated with the government for an expedited schedule, and … we are waiting for the 11th Circuit in our case to issue a decision any day now.”

In the article, Thomas also acknowledges how the CTA could be a powerful tool for rooting out crime, if it’s done correctly and doesn’t involve the government overstepping.

“It’s an extremely powerful tool,” Thomas said. “You see an LLC pop up on some phishing transaction, you can push a button or do a couple of keystrokes, and you can figure out that these 10 people might be on there. In the old days before the statute, you’d have to get a warrant; you’d have to actually do some gumshoe work to track that down, and this makes it all possible [putting it] at your fingertips.”

The article concludes with Thomas discussing the potential impact of the incoming Trump administration on the rule, including Trump having discretion over the rollout of regulations pursuant to the CTA.

“FinCEN will report to [Trump’s] Treasury secretary,” he said. “They have a lot of latitude as to how to go about the nuts and bolts of enforcement, and so I wouldn’t be surprised at all if they say, ‘Look, we’re going to hold off on this until we have final word on its constitutionality.”