What to Know & Implications: Federal District Court in Alabama Finds Corporate Transparency Act Unconstitutional

by Chris Williams, Chair – Corporate Transactional Group, FBFK Law

On March 1, 2024, Judge Liles Burke of the U.S. District Court of the Northern District of Alabama issued an opinion in National Small Business United v. Yellen, ruling that The Corporate Transparency Act (“CTA”) is “unconstitutional because it exceeds the Constitution’s limits on Congress’ power.”  The CTA was enacted by Congress in 2021 to address “the disclosure of corporate ownership and the prevention of money laundering and the financing of terrorism.” The CTA requires disclosure of beneficial ownership information for non-exempt corporations, limited liability companies, partnerships and other similar entities.

The District Court permanently enjoined the Treasury Department and other Federal officials from enforcing the CTA against the particular plaintiffs in the case. On March 4, 2024, FinCEN issued a statement that it would comply with the court’s order and not enforce the CTA against the particular plaintiffs in the action (i.e. Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or application, the National Small Business Association, and the members of the National Small Business Association).

It is widely expected the U.S. government will appeal this decision and seek a stay of the decision while the appeal is under consideration.

Because of the uncertainty as to how this case will ultimately be resolved and its applicability to jurisdictions other than the Northern District of Alabama, however, entities which would otherwise be required to file under the CTA should continue to proceed under the assumption a filing will be required and otherwise continue to monitor CTA developments.