On Friday, March 1, 2024, the U.S. District Court for the Northern District of Alabama declared the Corporate Transparency Act (the “CTA”) unconstitutional in the case of National Small Business United d/b/a the National Small Business Association v. Janet Yellen (Case No. 5:22-cv-1448). The opinion by U.S. District Court Judge Liles C. Burke holds that the CTA “exceeds the Constitution’s limits on the legislative branch and lacks a sufficient nexus to any enumerated power to be a necessary or proper means of achieving Congress’ policy goals.”
Judge Burke found the CTA to be unconstitutional because it exceeds the Constitution’s limits on Congress’s power, without even reaching a decision on whether it violates the First, Fourth or Fifth Amendments.
It is unclear whether this ruling is limited to its plaintiffs or more broadly impacts all businesses that are otherwise required by the CTA to report their beneficial ownership information to the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). In addition, this ruling will likely be appealed and thus the court of appeals, and possibly the Supreme Court, will also weigh in on the issue of the CTA’s constitutionality during the coming months and years.
We encourage our small business clients whose businesses were formed prior to January 1, 2024 to adopt a wait and see approach, and to refrain from submitting their reports until later this year as this case makes its way through the appellate process. If you have any questions about this ruling and its impact on your business, please contact your BauerGriffith attorney.
