Commonwealth Counsel Group

Corporate Transparency Act is Declared Unconstitutional in U.S. District Court

Months after the Corporate Transparency Act (CTA) went into effect, a federal court has found it unconstitutional, ruling that it exceeds the Constitution’s limits on Congress’ power.

On March 1, 2024, U.S. District Court Judge in Alabama issued a 53-page opinion granting summary judgment for the National Small Business Association and held that the Corporate Transparency Act “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 Court found the CTA to be unconstitutional because it exceeds the Constitution’s limits on Congress’ power.

Importantly, the Court did not reach a decision on whether the CTA violates the First, Fourth, and Fifth Amendments – leaving open the possibility that the CTA may be found unconstitutional on other grounds in subsequent lawsuits.  We anticipate Treasury Department will file an appeal to the Eleventh Circuit Court of Appeals.  We also expect to see similar challenges to the CTA in other US Federal District Courts soon.

FinCEN is permanently enjoined from enforcing the CTA against the named plaintiffs in that case. However, it is unclear whether continued compliance with the CTA will be required for companies not party to the Alabama case.

Additional updates to come.