On March 1, 2024, Judge Liles C. Burke of the Northern District of Alabama, Northeastern Division, ruled in U.S. v. Yellen that the Corporate Transparency Act (the “Act”) is unconstitutional. The federal district court found the Act exceeds Congress’s constitutional power. The court ruled that none of the legislative powers identified by the government, including the Commerce Clause, Congress’ taxing power, its authority over foreign affairs and national security, and the Necessary and Proper Clause, provide requisite authority for the Act. The court’s decision enjoined the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) from enforcing the Act against the named plaintiffs in the case, which are Isaac Winkles, the National Small Business Association, and the members of the National Small Business Association. FinCEN issued a statement clarifying that all other entities are still subject to the Act’s reporting requirements. The Department of Justice filed an appeal of the federal district court’s decision with the United States Court of Appeals for the Eleventh Circuit on March 11, 2024.
The Act, effective January 1, 2024, requires many business entities to report their beneficial ownership information (“BOI”) with FinCEN. A company’s BOI includes personal identifying information for each individual that exercises substantial control over the company, owns 25% or more of its interests, or filed the paperwork to create the entity.
For more general information on the Act, please review our prior publication.
While much is still up in the air regarding the Act’s enforcement, we recommend that all businesses created on or after January 1, 2024 (which are required to report within 90 days of creation) file their BOI by their reporting deadlines. However, entities formed prior to January 1, 2024 have until January 1, 2025 to file, and should wait to file their BOI as the litigation develops.
