Corporate Transparency Act Deemed Unconstitutional for SBA
On March 1, US District Court declared the Corporate Transparency Act (CTA) to be unconstitutional. The enforcement of the CTA has been suspended (for the plaintiffs only, which includes the National Small Business Association). FinCEN posted a response to the ruling that implies that all other covered firms must continue to comply with the CTA. The court rejected the government's arguments that the CTA is necessary as a matter of national security and that it should be permitted under the interstate commerce regulatory authority of Congress.
The CTA is a new federal law to combat money laundering and tax evasion, among other illegal financial activities, by requiring covered companies to submit information about their beneficial owners to FinCEN. Deadlines for reporting can be as short as 90 days for companies formed in 2024, while other companies existing prior to January 1, 2024 may have until January 1, 2025 to file. Potential penalties for noncompliance with the CTA can include fines of up to $10,000 per violation and up to two years imprisonment.
FinCEN is expected to appeal the federal court ruling.
(This does not constitute legal advice and it is recommended to consult with your attorney regarding compliance with CTA for you and your company.)
Notice Regarding National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.) | FinCEN.gov
