If by "outlawed", you mean illegal, then no, they're not directly illegal. It's just a very outdated means to convert fuel to rotational motion, so they're being phased out due to market pressure. It's hard to sell a flat head when the competition is selling OHV. OHV runs smoother, produces more power for the displacement, is easier to get into EPA compliance, etc.
It's similar to 2-stroke lawn mowers. To my knowledge, they're not directly illegal. It's just that it's not feasible to maintain the emission requirements of that engine type with 2-stroke combustion.