LEGAL ALERT
On March, 1, 2024, the U.S. District Court for the Northern District of Alabama held that the federal Corporate Transparency Act (CTA) is unconstitutional. The plaintiffs in the case are the National Small Business Association (NSBA) and one of its members, and they sought an injunction to prohibit the agency that administers the CTA, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), from enforcing the CTA. The District Court ruled that the CTA exceeds the Constitution’s limits on the legislative branch and lacks a sufficient nexus to any enumerated power to be a necessary or proper means of achieving Congress’ policy goals.
Next Steps and Takeaways
The District Court’s injunction appears to apply only to the plaintiffs in the case, and it remains uncertain whether it will extend to other NSBA members, including those located outside of the Northern District of Alabama. Entities that are not involved in this case still appear to be bound by the CTA at this time. We expect to receive further guidance from FinCEN in the coming days. The U.S. Department of the Treasury will likely appeal this decision and may request that the District Court’s order prohibiting enforcement be stayed pending an appeal. We will continue to monitor and post updates on developments relating to the CTA.
Resources
Webinar: The Corporate Transparency Act: Making Sense of the New US Beneficial Ownership Reporting Law, February 13, 2024 | View Recording
We unpack the new far-reaching federal law and provide companies with practical guidance on how to comply. Topics will include which companies are required to comply with the new law, a review of key terms and potential pain points, and a discussion of the “what, when, and how” of filing reports under the new law. We will also review examples on how very similar corporate structures may lead to very different compliance requirements and discuss actions companies could take to be better assured that they will obtain the required information from their beneficial owners in a timely manner. Presented by Corporate, Securities, and Finance practice group, Joseph B. Allen, Brian C. Purcell, and Courtney G. Whalen.
Articles:
The Corporate Transparency Act - Recent Updates on the Eve of the CTA's Effective Date | Joseph B. Allen
The fourth installment in a multi-part series looking at the new Corporate Transparency Act describes recent updates from FinCEN to its CTA guidance as the law is set to take effect January 1, 2024. The updates include an extended deadline to file the initial report for reporting companies formed or registered in 2024; clarification of the effective date for information reported on the initial report; and helpful information when deciding whether to use FinCEN identifiers for entities.
The Corporate Transparency Act - Who Counts as a Beneficial Owner? | Joseph B. Allen
The third installment in a multi-part series looking at the new Corporate Transparency Act discusses the Act’s definition of “beneficial owners”, a concept at the heart of the new law.
Out of Scope - Exemptions from the Corporate Transparency Act | Joseph B. Allen
The second installment in a multi-part series looking at the new Corporate Transparency Act discusses what is likely to be the first question that many companies have whenever a new law is passed – are we exempt?
An Intro to The Corporate Transparency Act (CTA) | Joseph B. Allen
A federal law adopted in 2021 takes effect on January 1, 2024, and imposes reporting obligations on many entities that may not be accustomed to reporting much information. This article provides a brief overview of the law, and future articles will dive deeper into its requirements.
