The Corporate Transparency Act (CTA), which became effective January 1, 2024, was challenged in a federal district court by the National Small Business Association. The case is National Small Business United, d/b/a National Small Business Association, et al. v. Janet Yellen, et al., Case No. 5:22-cv-01448-LCB (N.D. Ala.). On 3/1/24, the court granted the motion for summary judgement brought by the plaintiffs and ruled that the CTA is unconstitutional.
FinCEN released a statement on its website on 3/4/24 regarding this ruling, below is the full update from the FinCEN website:
“On March 1, 2024, in the case of National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.), a federal district court in the Northern District of Alabama, Northeastern Division, entered a final declaratory judgment, concluding that the Corporate Transparency Act exceeds the Constitution’s limits on Congress’s power and enjoining the Department of the Treasury and FinCEN from enforcing the Corporate Transparency Act against the plaintiffs. FinCEN will comply with the court’s order for as long as it remains in effect. As a result, the government is not currently enforcing the Corporate Transparency Act against the plaintiffs in that action: Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and members of the National Small Business Association (as of March 1, 2024). Those individuals and entities are not required to report beneficial ownership information to FinCEN at this time.”
Given that the ruling in this case was specific to the Plaintiffs (the National Small Business Association (NSBA) and a specific named business owner who is a member of the organization) it is currently unknown how the ruling will apply to other Reporting Companies. At this time it may be prudent for clients (particularly those that were formed in 2024 and have only a 90-day window after formation in which to file) to continue to fulfill their reporting requirement as set forth by the CTA until further information becomes available. We anticipate that there will be appeals in this case and we are tracking this closely and will be in touch with more updates as they develop.