On Friday, March 1, Federal District Judge Liles Burke in Alabama ruled that the Corporate Transparency Act (CTA) exceeded Congress’s authority under the Constitution.

“Congress sometimes enacts smart laws that violate the Constitution,” Judge Burke wrote in a 53-page filing. “This case, which concerns the constitutionality of the Corporate Transparency Act, illustrates that principle.”

The CTA is requires the Financial Crimes Enforcement Network (FinCEN) to create a new data collection regime for small businesses to submit the identifying information of “beneficial owners” who exert “substantial control” over their businesses.  It was passed in 2020 to combat money laundering and tax evasion, but would have applied to more than 32 million entities – including virtually every small business in America – to hand over their sensitive private data to the government.  FinCEN has been issuing rules and working on implementation ever since, and started collecting data on January 1^st of this year.

After the ruling FinCEN issued a statement, saying that it would comply with the Court order and suspend collecting beneficial ownership information from the plaintiffs in the case, including “members of the National Small Business Association (as of March 1, 2024).”  For everyone else, FinCEN is still, as of this afternoon, collecting Beneficial Ownership Information on its website.  AGC expects that the case will be appealed to the 11^th Circuit Court of Appeals, which could expand the effect of the ruling to a broader class if the ruling holds.  To learn more about the CTA, AGC hosted FinCEN for a webinar back in January which is available here.  In April, we expect to host an additional webinar with additional information.

If you have any questions, please contact Matthew Turkstra at [email protected], or (202) 547-4733.