Corporate Transparency Act (CTA) Update: Alabama U.S. District Court Finds the CTA Unconstitutional

On March 1, 2024, the U.S. District Court for the Northern District of Alabama ruled that “[t]he Corporate Transparency Act is unconstitutional because it cannot be justified as an exercise of Congress’ enumerated powers.” But the ruling only prohibits enforcement of the Corporate Transparency Act against the plaintiffs in the case, i.e., the National Small Business Association and its specific members named in the action. On March 4, FinCEN announced it also will not seek enforcement of the CTA against reporting companies that were members of the NSBA on or before March 1, 2024.   Similar cases are pending in other parts of the country, and parties will likely attempt to use this ruling in other challenges to the CTA. 

The ultimate effect of this ruling is unknown as the U.S. government will likely appeal and/or seek a stay of its enforcement. Reporting companies not parties to the case should continue to comply with the CTA unless there is a further invalidation of the law that extends to additional reporting companies. Reporting companies that were, or believe they may have been, members of the NSBA on or before March 1, 2024 may wish to seek legal counsel about the impact of FinCEN’s communications regarding its enforcement decision.  As a reminder, a reporting company newly formed in 2024 has 90 days after formation to report its beneficial ownership information, and a reporting company formed prior to 2024 has to report its beneficial ownership information before January 1, 2025 (in each case, unless an exemption applies).      

Please note, readers should consult counsel about the application of the CTA to their specific situation. Lewis Roca will advise clients on CTA compliance only if Lewis Roca and the client have expressly agreed in writing to an engagement for that purpose.

Read our previous coverage on the CTA here.

If you have questions, please contact Scott D. DeWald, Andrew F. Dixon, Laura A. Lo Bianco, Mark D. Patton, Matthew C. Sweger, Amanda L. Thatcher, or Karen L. Witt.