By Stephen Speiser, Esq.
In Nat’l Small Bus. United v. Yellen, 2024 U.S. Dist. LEXIS 36205 (March 1, 2024) the U.S. District Court for the Northern District of Alabama ruled that the CTA is unconstitutional in a lawsuit brought by the National Small Business Association (NSBA) and one of its members, Isaac Winkles. The court found that the CTA exceeds Congress’s enumerated powers, rejecting the government’s arguments that it is authorized under the foreign affairs powers, the Commerce Clause, and the taxing powers.
The court issued a final judgment declaring the CTA unconstitutional and permanently enjoining the government from enforcing it against the plaintiffs in the case – Isaac Winkles, the reporting companies for which he is the beneficial owner, the NSBA, and NSBA members as of March 1, 2024. However, the court did not issue a nationwide injunction, so the CTA remains in effect for all other reporting companies. FinCEN has stated it will comply with the court’s order as to the named plaintiffs but expects all other reporting companies to continue complying with the CTA.
The U.S. government has appealed the district court’s ruling to the Eleventh Circuit Court of Appeals. The government may also seek a stay of the district court’s ruling pending the appeal. Other parties may file similar lawsuits seeking to expand the scope of the injunction beyond the named plaintiffs, but for now, the CTA’s reporting requirements remain in effect for most companies, except for the specific plaintiffs covered by the district court’s injunction.
Impact of the Corporate Transparency Act Ruling on Accounting Firms
As of this writing, anyone required to file a Beneficial Owner Information report under the CTA will not be affected by this ruling unless they were a current NSBA member as of March 1, 2024. Accordingly, until further notice, CPAs should continue to advise clients that they must file the requisite BOI reports with FinCEN.
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