Corporate Transparency Act: CTA Litigation Tracker

The Corporate Transparency Act (CTA) took effect January 1, 2024 as part of a broad antiterrorism and anti-money laundering effort of Congress. The CTA requires certain entities, known as “reporting companies,” to report certain information about their “beneficial owners” to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury.

This article will be updated as prominent CTA litigation takes place across the country.

CTA Declared Unconstitutional by Alabama Federal Court

On March 1, 2024, the CTA was declared unconstitutional by the United States District Court for the Northern District of Alabama. The National Small Business Association (NSBA) and Isaac Winkles, an individual member of the NSBA, were granted summary judgment in the case. While not addressing all of the plaintiffs’ claims, the court ruled that the CTA exceeded Congress’ enumerated powers under the U.S. Constitution. In defense of its constitutionality, the government argued the CTA (i) falls under the Commerce Clause and the Necessary and Proper Clause, and (ii) is an exercise of Congress’ authority over national security and foreign affairs.

What Does This Mean for Me?

Importantly, the court only enjoined the government from enforcing the CTA’s obligations against the specific plaintiffs in the case. The Department of Justice (DOJ) has appealed this decision, and released a statement that FinCEN will continue to enforce the CTA and its obligations on reporting companies. Accordingly, unless your entity is a member of the NSBA as of March 1, 2024, you are required to comply with the reporting requirements of the CTA.

Be on the lookout, however, for other plaintiffs to file suit on similar grounds in other federal districts. This will likely lead the DOJ to seek expedited review in the 11^th Circuit Court of Appeals. While an 11^th Circuit decision would provide more clarity on the issue than the federal court in Alabama, Iowa businesses should still continue to comply with the obligations of the CTA. Unless and until something nationally occurs—such as a United States Supreme Court decision or subsequent action by Congress—FinCEN will continue to enforce the CTA.

Reporting companies formed prior to 2024 will have until January 1, 2025 to file their initial beneficial ownership information report. Reporting companies formed in 2024 will have 90 days to file their initial beneficial ownership information report, and reporting companies formed on or after January 1, 2025 will have 30 days to do so.

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Read more about the CTA, beneficial ownership information, and other compliance requirements at Nyemaster’s Corporate Transparency Act Information Hub.

Examine more details of the CTA with each article in the series:

• What Entities Are Required to Report?
• Who Is a Beneficial Owner?
• Who Is a Company Applicant?
• What Information Needs to Be Reported?
• When Are Filing Dates and What Are the Penalties?

For legal advice on the CTA and the obligations it imposes on businesses, please contact your Nyemaster attorney.