On March 1, 2024, the U.S. District Court for the Northern District of Alabama (Northeastern Division) held that the Corporate Transparency Act (the “CTA”) is unconstitutional. See National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.). The lawsuit was brought by the National Small Business Association, a small business advocacy group (the “NSBA”), against the U.S. Treasury Department and its leaders. The NSBA argued that the CTA is unduly burdensome on small businesses, violates privacy and free speech protections, and infringes on states’ powers to govern business. The Court sided with the NSBA, holding that the CTA was unconstitutional because Congress exceeded its powers in enacting the law.
The Court’s decision is limited to the plaintiffs in the matter, which means FinCEN is not requiring beneficial ownership information reporting from only those members of the National Small Business Association trade group as of March 1, 2024. FinCEN is expected to appeal the decision, and we may see other lawsuits filed against the Treasury Department seeking to block the CTA. For now, except as provided above, all parties subject to the CTA should prepare to comply with the law. Reporting entities that are formed in 2024 should register with FinCEN within 90 days of formation, absent further developments. Additionally, reporting entities that were formed prior to 2024 should continue to be prepared to register with FinCEN by December 31, 2024.
