The federal Corporate Transparency Act (CTA), which went into effect on January 1
st of this year, is currently the subject of a constitutional challenge. The link to our prior alert regarding the CTA can be found
here.
On March 1, 2024, a federal District Court in Alabama held that the CTA is unconstitutional. (See National Small Business Un., et al. v. Yellen, Case No. 5:22-cv-1448-LCB, N.D. Ala.). However, the scope of the ruling is limited to the plaintiffs who brought the lawsuit, as the court prevented further enforcement of the law only against the National Small Business United members. FinCEN has accepted this position pending appeal. It is anticipated that the ruling will be appealed to the U.S. Court of Appeals for the Eleventh Circuit, where it must be briefed and argued before a three-judge panel. If FinCEN loses on appeal, FinCEN could petition the U.S. Supreme Court.
Given the District Court’s ruling is not nationwide in scope and only applies to National Small Business United members, Flaster/Greenberg recommends that all persons and companies affected by the CTA continue to comply with FinCEN’s reporting requirements until there is action by Congress, FinCEN, or a higher court.
