In a landmark opinion issued on Friday, March 1, 2024, a Federal District Court in Huntsville, Alabama issued a ruling that declared the Corporate Transparency Act (CTA) unconstitutional. In a 53-page opinion granting summary judgment for the National Small Business Association, the court held that the “Corporate Transparency Act 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.”

The CTA, enacted by Congress to combat money laundering, terrorism financing, and other illicit activities, required certain corporations and limited liability companies (LLCs) to disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). Proponents argued that such transparency was crucial in identifying and preventing criminal activities, while opponents raised concerns about privacy and regulatory burdens.

It is essential to note that the Court’s order on the CTA applies solely to the plaintiffs involved in the case. This decision does not automatically invalidate the CTA nationwide, and the government can still enforce the CTA’s reporting requirements against other small businesses.

However, this ruling sets a significant precedent that could allow more companies to legally challenge the CTA’s constitutionality and potentially additional court rulings that could have impacts on small businesses nationwide. Our team at Worden Thane will continue to monitor legal developments impacting the CTA and reporting requirements for small businesses. If you have additional questions about how the CTA may impact you, please contact one of our experienced business attorneys today.