Alabama Federal Judge Rules Corporate Transparency Act Unconstitutional
On March 1, 2024, the United States District Court for the Northern District of Alabama Northeastern Division declared the Corporate Transparency Act (“CTA”) unconstitutional. In National Small Business Association v. Yellen, Judge Liles C. Burke found that Congress had exceeded its powers in enacting the legislation.
The CTA requires certain business entities to file information on their “beneficial owners” with the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of Treasury. These entities are referred to as “reporting companies” and include most entities formed under state law, like LLCs, LLPs, and corporations. The CTA applies both to US entities and to foreign entities doing business in the United States. The CTA further requires reporting companies to file updated reports within thirty (30) days of any change in information previously reported by the reporting company.
As several legal commentators have pointed out, business entities and those who represent them should not assume that this holding relieves them of the duty to continue to comply with the CTA. The Alabama holding was expressly limited to the plaintiffs in that case.
An appeal by the Treasury Department is expected. We will continue to monitor this case and any other similar cases and report developments as they arise.
