As attorneys and accountants are well aware, Congress passed the Corporate Transparency Act (CTA) which requires most companies to register with FinCen where they must disclose their ownership or the managers in control of the entity in confidential filings.  In National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.), the National Small Business Association (NSBA) and one of its members brought a suit in the US District Court of the Northern District of Alabama challenging the CTA and FinCEN’s implementing rules. On March 1, 2024, the District Court ruled for the plaintiffs and enjoined its enforcement for now holding that the CTA is unconstitutional because it “exceeds the Constitution’s limits on the legislative branch.”  

The decision is expected to be appealed to the Federal Court of Appeals for the Eleventh Circuit and may eventually make its way to the Supreme Court. Similar litigation has been filed in other cases, however, there are no other reported decisions yet staying enforcement of the CTA at this time.

However, this injunction is technically only effective as to the Plaintiffs in that suit which includes any business which is a member of the NSBA. Other companies falling within the CTA’s scope are still required to register and comply including:

• New entities formed or registered on or after January 1, 2024 which are not exempt should plan to comply with the CTA within 90-days of formation
• Existing entities formed or registered prior to January 1, 2024 which are not exempt should continue to plan for compliance before December 31, 2024

It is also important to note that although this decision shut down the federal statute, this decision does nothing to stop similar state acts which have introduced and implemented disclosure laws similar to the CTA, such as the New York LLC Transparency Act.

If you have questions regarding compliance, please reach out to RKW to discuss your situation.

‍

‍

‍