Business and International Tax Blog

The United States District Court for the Northern District of Alabama - Northeastern Division has issued a ruling declaring the Corporate Transparency Act (CTA) unconstitutional. As a result, the federal government is permanently enjoined from enforcing the CTA against the named plaintiffs, the National Small Business United d/b/a the National Small Business Association, et al., who challenged the law.

This decision may impact the enforcement of the CTA, and brings into question whether Beneficial Ownership Information reports should be filed by companies with FINCen within 90 days after formation for entities formed on or after January 1, 2024, and by the end of the year for entities formed prior to January 1, 2024, as per the regulations that went into effect at the beginning of this year.

For those entities that were formed on January 1, 2024, the 90-day deadline to file a Beneficial Ownership Information report is at the end of this month, March 31, 2024. Given the Final Judgment only applies to the named plaintiffs at this point, businesses should not rely on this decision to avoid the required disclosure. On March 4, 2024, FinCEN issued a statement in response to the ruling that it will “comply with the court’s order as long as it remains in effect” and not require the named plaintiffs to report beneficial ownership to FinCEN “at this time.” In this statement, FinCEN did not advise as to the tens of millions of other entities that are not affected by this ruling and would be required to report beneficial ownership information if the law is ultimately upheld.

We are closely monitoring this case and alerts from federal courts and the federal government for further guidance. Click here for a copy of the Final Judgment issued by the court.

Disclaimer: This Client Alert does not constitute tax or legal advice, does not create an attorney-client relationship, and is intended for informational purposes only.