A federal judge in the U.S. District Court for the Northern District of Alabama recently ruled the Corporate Transparency Act (CTA) is unconstitutional.

In an opinion issued March 1, 2024, Judge Liles Burke stated that 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.”

The long-awaited ruling came in the case of National Small Business United v. Yellen, which was filed in November 2022. The Court permanently enjoined the government from enforcing the CTA against the two named plaintiffs, National Small Business United, d/b/a National Small Business Association, and Isaac Winkles, an Alabama small business owner.

The government is expected to appeal the decision, with the litigation continuing to play out in the federal court system.

Given that the scope of the holding is narrow and applies only to the two named plaintiffs, the Financial Crimes Enforcement Network (FinCEN) will likely continue to enforce the CTA.

Clients should continue to comply with the law’s reporting requirements.

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