Corporate Transparency Act Ruled Unconstitutional

On March 1, 2024, a Federal District Court in Alabama held that the Corporate Transparency Act (the “CTA”) is unconstitutional.[1] The Court reasoned that the plaintiffs were entitled to summary judgment because the CTA “exceeds the Constitution’s limits on Congress’ power.” As the Court ruled Congress exceeded its enumerated powers, the Court found it unnecessary to render a decision on the plaintiffs’ other arguments, specifically, whether or not the CTA violates the First, Fourth, and Fifth Amendments.

The Court’s decision permanently enjoined the government from enforcing the CTA’s reporting obligations against the plaintiffs. On March 4, 2024, FinCEN issued a notice as a result of the ruling stating that FinCEN would not enforce the CTA against the plaintiffs, including any member of the National Small Business Association.

The government will likely appeal this decision and more will be learned as litigation advances. Nonetheless, the Court’s ruling is a win for small businesses not exempt from the CTA. Stay tuned for updates and please reach out to the KMK Law CTA Team with any questions.

[1] Nat'l Small Bus. United v. Yellen, No. 5:22-cv-1448-LCB, 2024 U.S. Dist. LEXIS 36205, at *1 (N.D. Ala. Mar. 1, 2024).

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