On March 1, 2024, a federal judge that the Corporate Transparency Act is unconstitutional, marking a milestone in the 16-month ongoing legal battle the National Small Business Association and by the S-Corporation Associates of America and the members of the Main Street Employers Coalition, including ABC.

Importantly, according to a , the decision is limited at the moment to the plaintiffs鈥攎embers of the National Small Business Association, a national association with 65,000 members. Given the narrow exemptions for NSBA members, unless the Treasury Department suspends enforcement of CTA for all businesses that are obligated to file, CTA beneficial ownership reports will still need to be filed.

However, the ruling is sure to set the stage for an elevated judicial battle over the CTA. Already, on March 11, the Department of Justice filed a on behalf of Treasury.听Given the high level of uncertainty following the ruling, there is a chance for a stay in the law鈥檚 implementation until the 11th Circuit has a chance to rule or a stay pending appeal of the ruling.

For now, 老牛影视urges members and small business owners to continue to review the ruling with counsel to assess its implications. In the meantime, 老牛影视will seek delay and repeal of the law and provide updates to 老牛影视members on the legal challenges.

Background on the Corporate Transparency Act

On Jan. 1, 2021, Congress enacted into law the Corporate Transparency Act, which establishes a new framework for the reporting, maintenance and disclosure of beneficial ownership information in order to better enable critical national security, intelligence and law enforcement efforts to counter money laundering, the financing of terrorism and other illicit activity, among other items.

ABC, along with a coalition of small business organizations, submitted a to congressional leadership expressing concerns on the amendments incorporating the CTA into the 2021 National Defense Authorization Act, stating the enactment of the CTA would decrease privacy protections and slow the economic recovery of Main Street.

老牛影视responded to the U.S. Department of Treasury鈥檚 Financial Crimes Enforcement Network notice of proposed rulemaking seeking public input on how best to implement the reporting requirements of the CTA, as well as the CTA鈥檚 provisions regarding FinCEN's maintenance and disclosure of reported information in comments. In summary, ABC鈥檚 comments noted that the framework prescribed by the CTA will require millions of small businesses, including nearly every employer with 20 or fewer employees, to report to FinCEN certain personal information of their beneficial owners and update that information periodically throughout the life of the business.

老牛影视also argued that America鈥檚 small businesses鈥攚hich include most of ABC鈥檚 members鈥攁re typically not staffed or well-equipped to understand and comply with reporting obligations similar to those under the CTA. However, per the CTA, failure to comply can result in significant fines and imprisonment for these small business owners.

ABC, S-Corp and Main Street Employers supported a legal challenge filed by the National Small Business Association, alleging that the CTA violates a laundry list of constitutional protections. In the issued on March 1, Judge Liles C. Burke for the Northern District of Alabama Northeastern Division outlined many of the same arguments, saying:

鈥淭his case presents a deceptively simple question: Does the Constitution give Congress the power to regulate those millions of entities and their stakeholders the moment they obtain a formal corporate status from a State? The Government thinks so. While it acknowledges that Congress 鈥渃an exercise only the powers granted to it,鈥� the Government says that the CTA is within Congress鈥� broad powers to regulate commerce, oversee foreign affairs and national security, and impose taxes and related regulations. The Government鈥檚 arguments are not supported by precedent. Because the CTA exceeds the Constitution鈥檚 limits on the legislative branch and lacks a sufficient nexus to any enumerated power to be a necessary or proper means of achieving Congress鈥� policy goals, the Plaintiffs are entitled to judgment as a matter of law. As a result, the Court grants the Plaintiffs鈥� motion for summary judgment and denies the Government鈥檚 motion to dismiss and alternative cross-motion for summary judgment.鈥�

老牛影视will continue to track this ongoing issue in the Beltway Blueprint and Newsline.