Corporate Transparency Act Ruled Unconstitutional by Federal District Court

On March 1, 2024, the US District Court for the District of Alabama declared the Corporate Transparency Act unconstitutional in the case of National Small Business Association v. Yellen (Case No. 5:22-cv-01448). The Corporate Transparency Act (“CTA”) became effective January 1, 2024 and required all applicable businesses to file a report with the federal government. For businesses in existence before January 1, 2024 that are not subject to one of the exceptions, the report was due to be filed by January 1, 2025. For newly created applicable businesses in 2024, the initial report was due 90 days from entity creation.

For the time being, the ruling only suspends enforcement of the law against members of the National Small Business Association. However, the ruling creates uncertainty for businesses’ compliance obligations under the law. It is expected that more clarity on the Government’s response to this ruling will be forthcoming in the next few weeks.