Larry's Tax Law

I was hoping that I could report to my readers that the turbulent and lengthy ride of the Corporate Transparency Act (“CTA”) was, one way or another, finally over!  Unfortunately, I am unable to deliver that news today.  Instead, I am briefly reporting on the most recent development in the crazy saga.

From previous reporting, you may recall that, on January 23, 2025, the U.S. Supreme Court, in Texas Top Cop Shop, Inc. et al v. Merrick Garland, Attorney General of the United States et al., lifted the Fifth Circuit’s injunction, that was preventing the government from enforcing the CTA.   However, as also reported, the SCOTUS decision had no practical impact on the government’s ability to enforce the CTA because another court (the Eastern District of Texas) in a different case (Smith et. al.  v. U.S. Department of Treasury et. al.) had issued (on January 7, 2025) a nationwide injunction against the government’s enforcement of the CTA.  Accordingly, that court’s injunction, despite the high court’s decision in Texas Top Cop Shot, Inc., remained in place.

I last reported on December 27, 2024, that the Corporate Transparency Act (“CTA”) hit yet another speed bump.  The U.S. Court of Appeals for the Fifth Circuit (“Fifth Circuit”) put the CTA on ice as of December 24, 2024, restraining the government from enforcing the new law while it heard the underlying matter in Texas Top Cop Shop, Inc. et al v. Merrick Garland, Attorney General of the United States et al.

On December 31, 2024, the government petitioned the U.S. Supreme Court (“Supreme Court”), asking it to remove the stay, allowing the government to enforce the CTA pending the outcome of the Fifth Circuit case and the Supreme Court’s decision should it accept a writ of certiorari and ultimately rule on the constitutionality of the CTA.

On June 28, 2024, in Loper Bright Enterprises v. Raimondo,[1] the U.S. Supreme Court overruled the landmark case of Chevron U.S.A. v. Natural Resources Defense Council, Inc. et. al.[2]  Interestingly, the Loper decision was rendered exactly 40 years and three days after the U.S. Supreme Court had decided Chevron.

I expect there will be a slew of law review and other scholarly journal articles that will examine in detail the court’s decision and its impact on American jurisprudence.  This blog article is not designed to provide that type of commentary.  Rather, my aim is to provide readers with a succinct but clear understanding of the Loper ruling and its likely implications relative to the administration of our federal tax laws.  

On June 21, 2018, the U.S. Supreme Court reversed half a century of legal precedent in a landmark 5-4 decision, South Dakota v. Wayfair, Inc. Under prior law, a state was forbidden from collecting sales tax against out-of-state sellers unless the sellers had physical presence within the state (such as a business location, employees, or property). 

The physical presence standard arose from a decision in a 1967 U.S. Supreme Court case, National Bellas Hess v. Department of Revenue of Illinois. In that case, the Court held that a mail-order company, whose only connection with customers in Illinois was by common carrier or U.S. mail, did not have sufficient connection with the state to warrant allowing it to tax the company. In 1992, the Court affirmed that holding in Quill Corp. v. North Dakota. The physical presence standard established by the Court in Bellas Hess and Quill has been a bright-line rule that presided over the rise of Internet commerce. That rule has now changed!