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Corporate Transparency Act Held Unconstitutional, For Now

We now return to the Corporate Transparency Act (CTA) that was the subject of my article, FinCEN Releases Final Rule On Beneficial Ownership Information And Its Effect On Creditor-Debtor Law (Oct. 8, 2022). This is the law that requires LLCs, which are by far the most popular form of entity for companies that are not publicly traded, to annually disclose their beneficial owners to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The stated goal of the CTA is to help law enforcement root out various nefarious activities involving LLCs such as money laundering. Since there are so many LLCs which meet these reporting requirements — an amazing 32.6 million entities according to FinCEN’s own estimates — it was inevitable that the CTA would face challenges. The first of these challenges has resulted in the Memorandum Opinion of the U.S. District Court for the Northern District of Alabama in Nat’l Small Bus. United v. Yellen, N.D.Ala. Case No. 22-CV-1448 (Mar. 1, 2024), which has held the CTA to be unconstitutional and you can read the opinion for yourself here.

This is, of course, a lower court opinion and there is a 100% chance that it will be appealed to the U.S. Court of Appeals for the Eleventh Circuit, which handles Alabama federal court appeals, so this is only the beginning of the story of this case and nothing like its ending. Even after the Eleventh Circuit issues its appellate ruling, there is a near certainty that the case will be further appealed to the U.S. Supreme Court and this is precisely the type of case that the highest judicial court will accept the discretionary Writ of Certiorari and hear. So, if one were to say that this decision basically means nothing since it will be appealed anyway and perhaps twice, well, that wouldn’t be too far from the mark. Yet, because this decision does hold the CTA to be unconstitutional, it may cause FinCEN to delay enforcement pending further appeal, which I will further discuss below.

Originally posted on Forbes Article titled Corporate Transparency Act Held Unconstitutional, For Now

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