U.S. District Court Rules Corporate Transparency Act is Unconstitutional

U.S. District Court Rules Corporate Transparency Act is UnconstitutionalThe U.S. District Court for the Northern District of Alabama (“USDC”) held on March 1, 2024 that the Corporate Transparency Act (“CTA”), which requires most reporting companies (corporations and LLCs) to file a beneficial ownership information report (“BOIR”) with the Financial Crimes Enforcement Network (“FinCEN”)—is unconstitutional. The USDC rejected the government’s argument that Congress had the authority to enact the CTA under its Constitutional powers to regulate foreign affairs and interstate commerce and to impose taxes. The USDC acknowledged that the CTA was designed to stop U.S. and non-U.S. entities from engaging in money laundering, tax avoidance, and other criminal activities. However, the USDC found that the reporting requirements were not sufficiently tailored to be within Congress’s powers and also impinged on the powers traditionally held by state governments over the terms of the formation of new companies. Although the CTA went into effect on January 1, 2024 for new entities, the USDC’s opinion means the law currently is not in effect. The U.S. government will probably appeal this and seek a stay of the decision while the appeal is pending.

Contact experienced Business Attorney Robert Friedman at 585-484-7432 for guidance and advice on properly starting your small business in New York, including LLCs and corporations.