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Trouble in Paradise: The Corporate Transparency Act May Be Unconstitutional

On Friday, March 1, 2024, the newly enacted Corporate Transparency Act (CTA) was ruled unconstitutional by a U.S. District Court judge in Alabama. The CTA, which went into effect January 1, 2024, requires unprecedented federal reporting of the beneficial owners of most small businesses (see our December 2023 article covering all of this more broadly).

The Alabama Judge held that the CTA is unconstitutional because it “exceeds the Constitution’s limits on the legislative branch and lacks a sufficient nexus to any enumerated power to be a necessary or proper means of achieving Congress’ policy goals.”   While numerous grounds were asserted for why the CTA should be found unconstitutional, including those based on privacy, self-incrimination, and due process, the Court did not address those arguments.  The Court found that Congress had exceeded its power when it enacted the CTA, and thus, it was unconstitutional.

It should be noted that this particular ruling is very limited in its scope and did not apply to businesses that may be subject to the CTA.  In fact, it only prohibits enforcement of the CTA’s reporting requirements to the plaintiffs in that particular case. However, in all likelihood, this ruling will be appealed to the U.S. Court of Appeals for the Eleventh Circuit (and, thereafter, potentially to the U.S. Supreme Court).  As further litigation regarding the CTA’s enforcement and rules work through the Court’s system, the future of the CTA and its enforcement is anything but certain.

Until the courts provide further clarification, all non-exempt businesses should continue to comply with the CTA’s filing requirements.   Therefore, all reporting companies should file a Beneficial Ownership Information report (BOIR) to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, as required within the filing deadlines. Unfortunately for those reporting companies that are under a strict deadline that requires the CTA filing within the ninety (90) days of filing a new entity in 2024, there may be no option but to proceed with filing the BOIR.

As always, if you have any questions on this latest ruling or any other matters related to the CTA, please feel free to contact the Oberman Law Firm.


About Us
Oberman Law Firm represents clients in a wide range of practice areas, including private equity, M&A, healthcare, corporate transactions, intellectual property, data privacy and security, regulatory compliance and governance, cross-border transactions, labor and employment, construction law, litigation, private clients’ services, corporate restructuring, and white-collar and governmental disputes.

As a firm, we offer the highest quality legal advice coupled with extraordinary and tailored service to deliver exceptional results to our clients. Our philosophy is to invest deeply in the brightest legal talent and build dynamic teams that operate at the pinnacle of respective practice areas. We believe in empowering our attorneys, encouraging entrepreneurialism, operating ethically and with integrity, and collaborating to bring the very best to every client engagement. These principles have guided us in building extraordinary and successful long-term partnerships with our clients.

Stuart J. Oberman is the founder and President of Oberman Law Firm. Mr. Oberman graduated from Urbana University and received his law degree from John Marshall Law School. Mr. Oberman has been practicing law for over 30 years, and before going into private practice, Mr. Oberman was in-house counsel for a Fortune 500 Company. <strong><a href="https://obermanlaw.com/people/stuart-j-oberman/"><span style="color: #0059b8;">Read More =></span></a></strong>