On March 1, 2024, the United States District Court for the Northern District of Alabama concluded that the CTA exceeded Congress’s constitutional authority. The government defendants argued that the CTA was a constitutional exercise of Congress’s powers to regulate commerce, oversee foreign affairs and national security, and impose taxes. However, the Court found no sufficient nexus between the CTA’s provisions and any enumerated power that would justify it as a necessary or proper means to achieve Congress’s policy goals.
Notably, this decision does NOT affect Colorado entities, unless such entities were members of the National Small Business Association on March 1, 2024.
National Small Business United v. Yellen, No. 5:22-cv-1448-LCB (N.D. Ala.)
CTA Compliance Remains Mandatory with Some Exceptions
On March 4, FinCEN indicated in a news release that “Other than the particular individuals and entities subject to the court’s injunction . . . reporting companies are still required to comply with the law and file beneficial ownership reports as provided in FinCEN’s regulations.” Therefore, compliance with the CTA remains mandatory, although “the government is not currently enforcing the Corporate Transparency Act against the plaintiffs in that action: Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and members of the National Small Business Association (as of March 1, 2024).” Financial Crimes Enforcement Network, Updated Notice Regarding National Small Business United v. Yellen, No. 5:22-cv-01448 (2024), https://www.fincen.gov/news/news-releases/updated-notice-regarding-national-small-business-united-v-yellen-no-522-cv-01448 (last accessed March 29, 2024).
Appeal Pending
On March 11, 2024, the government defendants filed a Notice of Appeal of the foregoing order with the United States Court of Appeals for the Eleventh Circuit (Appeal No. 24-10736-J).
This decision will NOT affect Colorado entities, except as noted above.
For more information about compliance with the Corporate Transparency Act, contact tlauridson@garfieldhecht.com.
