LOGIN Request a call

← BLOG  |  EMPLOYMENT LAW UPDATES  |  NEWS

Court Finds Corporate Transparency Act Unconstitutional

19 Mar

Share
Update Applicable to:Effective date
All employersSee details below


What happened?

On March 1, 2024, a federal judge in the U.S. District Court for the Northern District of Alabama held that the Corporate Transparency Act (CTA) is unconstitutional.


What are the details?

In the decision, National Small Business United v. Yellen, the district court concluded as a matter of law that the CTA exceeded the Constitution’s limits on congressional authority, declared it unconstitutional, and permanently enjoined the Treasury and FinCEN from enforcing the CTA against the plaintiffs (including members of the National Small Business Association).

This means the CTA will remain in full effect except for members of the National Small Business Association (NSBA) and reporting companies in the Northern District of Alabama (by extension).

For everyone else (like the rest of the country and entities, so far) the CTA remains in full effect and entities must comply with the regulations.

It is likely that (i) the decision will be appealed or (ii) FinCEN will propose amendments to the CTA to cure the constitutional issues

Business Considerations

The Seyfarth Shaw LLP law firm recommends the following:

  • Entities formed this year (2024), have 90 days from the date of formation to file their beneficial ownership report and should continue to gather information required to be disclosed but delay the filing of the report until the end of the applicable 90-day or if earlier, until further clarifying information is available. Entities that were in existence on or before January 1, 2024, and therefore not required to file a beneficial ownership report until the end of this year, continue to gather information required to be disclosed but delay the filing of the report until later this year when hopefully more information will be available on the effect of the decision.

  • Entities that are members of the National Small Business Association, regardless of when formed, FinCEN’s initial response, like many aspects of the CTA, is less than entirely clear and does not offer specific guidance as to whether or when in the future it will seek to enforce the CTA. Therefore, despite FinCEN’s announcement that it is not currently enforcing the CTA, the best practice would be to follow recommendations 1 or 2 above, as applicable.


Resources


Source References

Schedule a Call

Learn more about VensureHR and how we can make an impact on your business.

Contact VensureHR

This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.

Keep Your Business Compliant

Fill out the form below to receive monthly Employment Law Updates right in your inbox.

Keep Your Business Compliant

Fill out the form below to receive monthly Employment Law Updates right in your inbox.

Amazing!

You're all set.

Thanks for subscribing. Be on the look out for the Legal HR updates in your email.

Tracking Convertion image