Corporate Transparency Act Ruled Unconstitutional. But for Whom?

In a decision issued March 1, 2024, U.S. District Court Judge Liles Burke ruled that the Corporate Transparency Act (CTA) is unconstitutional. However, the ruling only applies to members of a certain association.

Finding that the law “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," Judge Burke issued a summary judgment in favor of the plaintiff, the National Small Business Association (NSBA) , preventing the enforcement of the CTA against this group.

It is important to note that the court’s ruling applies only to the NSBA and its members. The Department of Justice is expected to appeal this decision and to request a stay, or temporary pause, of the ruling while the case proceeds through the courts.

LISTEN TO THE ORIGINAL PODCAST: Is Your Small Business in Compliance With the Corporate Transparency Act?

What Does This Ruling Mean for Non-NSBA Members?

The Financial Crimes Enforcement Unit of the U.S. Department of Treasury has made clear that the law still stands for all other reporting companies and will continue to be enforced. At this time, all reporting obligations and associated timelines remain in effect.

Entities formed on or after January 1, 2024, which do not qualify for one of the 23 exemption reasons, must make their initial report within 90 days of formation. Reporting entities formed prior to January 1, 2024, have until January 1, 2025 to submit their initial report. All reporting companies must file updated reports within 30 days of any changes to or for their beneficial owners. 

The failure to comply may result in a $500 per day (up to $10,000) civil penalty and possible criminal penalties including up to two years in jail.

We will continue to monitor this case as it progresses. If you have any questions or concerns regarding the CTA and your reporting requirements, you can reach out to a Redpath and Company advisor here.