By: Alyssa Razook Wan
You may have heard the recent buzz surrounding the Corporate Transparency Act (“CTA”): a federal court in Alabama ruled the CTA to be unconstitutional because it is in excess of congressional power granted by the Constitution. Does this mean that business owners are no longer required to file CTA reports?
Well, don’t start celebrating just yet. The CTA still very much applies to business owners in the same manner as it did before this ruling (excepting the plaintiffs in the case). How can that be? The final judgment prohibits the enforcement of the CTA, but solely with respect to the plaintiffs, which are the National Small Business Association and a named individual member who is the beneficial owner of two businesses subject to reporting under the CTA. FinCEN (i.e., the Financial Crimes Enforcement Network, which is the federal agency administering the CTA), recently issued a notice stating that it will not enforce the CTA against the named plaintiffs in the suit for so long as the court’s order remains in effect.
You can read the notice here.
The FinCEN notice did not include statements relating to the enforcement of the CTA of general applicability. Therefore, this case does not offer relief to any other businesses. Additionally, it is expected that the government will appeal the case to the Eleventh Circuit Court of Appeals, which has jurisdiction over federal cases originating in Alabama, Florida and Georgia.
We will continue to monitor this litigation and any further comments by FinCEN. In the meantime, however, we encourage you to contact us with any questions regarding your CTA reporting obligations.
For more information, you may review our prior alert here or the FinCEN online newsroom here.
This alert summarizes certain key aspects of the CTA, but it is not a complete explanation of the new law. If you own an interest in a company, we encourage you to contact us to understand how this law applies to you and the steps that may be appropriate for you to take in order to comply.
Disclaimer: The information set forth herein is for educational and informational purposes only and does not nor shall be construed to constitute legal advice, or the consummation of an attorney-client relationship.