Corporate Transparency Act Unconstitutional? What the Court’s Ruling Means for You.

By Attorney Kelly Jesson

On Friday, March 1, 2024, a federal judge in Alabama ruled that the Corporate Transparency Act (“CTA”) is unconstitutional because Congress lacks the authority to require companies to disclose personal beneficial owner information (“BOI”) to the U.S. Department of Treasury’s financial crimes agency “FinCEN”.

A beneficial owner is defined as a person who, either directly or indirectly, exercises “substantial control” over the business or who owns or controls at least 25% of the ownership interests in a business, such as stocks, voting rights, or interests in profits. A beneficial owner also includes a person in their individual capacity as managing the business, such as an LLC Manager, Board Member, or CEO.

The required filing includes the individual’s full legal name, date of birth, current residential address, an identifying number from a non-expired government ID like a US passport or US driver’s license, and a copy of the ID document.  There are certain entities that are exempt from the CTA’s reporting requirements, such as nonprofits and large operating companies that are already subject to regulatory oversight such as publicly traded companies, insurance companies, and registered investment companies.

What does the court’s ruling mean for you?  Unfortunately, the court limited its ruling to apply only to the specific plaintiffs in its case. However, this ruling has opened the door for many other lawsuits of its type, and they are sure to follow.  If a court issues a ruling that the CTA is unconstitutional as applied to all businesses, then you may not have to comply with the CTA in the future.

However, for now, it is the law.  So, for new businesses that are formed this year, BOI must be reported to FinCEN report within 90 days of the business’s formation.  We take care of this for our clients.

Businesses that were formed before January 1, 2024, have the entire year to submit their first report to FinCEN.  Given the uncertainty of the law, we are waiting to submit BOI to FinCEN until late 2024 (in case we don’t have to do it at all).  We are submitting this information to FinCEN on behalf of our annual plan clients, as well.  If you are interested in having us handle your business’s reporting requirements, including the Secretary of State’s annual report which is due April 15, and the FinCEN report, please let us know!  More information is included here.