Phosphorylation of the C-terminal domain (CTD) of the large subunit of human RNA polymerase II (Pol II) is regulated during the transcription cycle by the combined action of specific kinases and phosphatases. Pol II enters into the preinitiation complex (PIC) unphosphorylated, but is quickly phosphorylated by Cdk7 during initiation. How phosphatases alter the pattern and extent of CTD phosphorylation at this early stage of transcription is not clear. We previously demonstrated the functional association of an early-acting, magnesium-independent phosphatase with early elongation complexes. Here we show that Ssu72 is responsible for that activity. We found that the phosphatase enters the transcription cycle during the formation of PICs and that Ssu72 is physically associated with very early elongation complexes. The association of Ssu72 with elongation complexes was stable to extensive washing with up to 200 mM KCl. Interestingly, Ssu72 ceased to function on complexes that contained RNA longer than 28 nt. However, when PICs were washed before initiation, the strict cutoff at 28 nt was lost. This suggests that factor(s) are important for the specific regulation of Ssu72 function during the transition between initiation and pausing. Overall, our results demonstrate when Ssu72 can act on early transcription complexes and suggest that Ssu72 may also function in the PIC prior to initiation.