Corporate Transparency Act – Unconstitutional

Wow! I bet the federal government did not see this coming. On March 1, 2024, the United States District Court for the Northern District of Alabama ruled that the Corporate Transparency Act (the “Act”) is UNCONSTITUTIONAL. The federal government will most certainly appeal this ruling. And, based on the significance of the decision placing limits on the scope and reach of federal government regulations, I presume that this matter will ultimately be decided by the U.S. Supreme Court. As an aside, this was the only lawsuit filed challenging the constitutionality of the Act. So, the federal government has no other opportunities for a court to rule in favor of the constitutionality of the Act and is stuck with this unfavorable decision.

So, what is the immediate impact of the court ruling the Act unconstitutional? It is too early to tell. This ruling is an interim order with the court issuing a final ruling in the near future. I expect that the court will issue its final ruling in the near future as this ruling throws compliance into chaos.

Based on the tenor of the court’s opinion, it seems the court will issue an injunction until all appeals have been exhausted which will place the Act on hold. While the injunction is in place, “reporting companies” will not be required to submit the beneficial ownership interest report with FinCen. But, we shall see.

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If the court does not promptly issue its final ruling, the following is recommended:

  • Companies created on or prior to December 31, 2023 – These reporting companies have until December 31, 2024 to file the beneficial ownership interest report with FinCen. I recommend that these reporting companies holdoff submitting this report until later this year in order to allow the court time to issue its final ruling.
  • Companies created on or after January 1, 2024 – These reporting companies only have 90 days from the date of creation to submit the beneficial ownership interest report. For reporting companies that fall into this category, I recommend holding off until a week or so prior to your 90 day deadline to submit the report in order to allow the court time to issue its final ruling. If your 90 day deadline is going to pass prior to the court issuing its final ruling, out of an abundance of caution, I recommend that you submit the report due to the Act’s civil and criminal penalties for failure to timely comply.

I assume that no one has any interest in me blabbing on about the ins and outs of the court’s decision but, if you do, feel free to be in contact to discuss.

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Chris Corpus

Founding Partner at Corpus Law Inc

This article does not provide legal advice or create an attorney-client relationship. If you have any questions or would like to learn more about this topic or if you have other legal questions, do not hesitate to contact Chris Corpus, Esq. of Corpus Law Inc at 216-973-2475. Copyright Christopher A. Corpus 2024.