The United States District Court for the Northern District of Alabama recently declared the Corporate Transparency Act (CTA) unconstitutional in an action brought by National Small Business Association (NSBA) and one of its members. The Court determined that the CTA exceeded the limits of Congress's legislative power and lacked a sufficient nexus to any enumerated power in the Constitution.
The Court rejected the government's argument that the CTA was within the ambit of the Constitution's Commerce, Taxing, and Necessary and Proper Clauses, along with Congress' foreign affairs and national security powers and enjoined the Treasury Department and FinCEN from enforcing the CTA against the NSBA and its members.
FinCEN has indicated that it will not require the NSBA or its members to file beneficial ownership information reports at this time. All other reporting companies remain subject to the CTA's reporting requirements, unless exempt.
It is expected that this litigation will continue through the appeal process.
For a description of the reporting obligations under the CTA, please see our prior client alerts.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
