Corporate Transparency Act unconstitutional?


On March 1, 2024, Judge Liles C. Burke of the US District Court for the Northern District of Alabama issued a 53-page opinion declaring the Corporate Transparency Act (CTA) as unconstitutional. The National Small Business Association was granted summary judgment, with Judge Burke ruling that the CTA exceeded the Constitution’s limits on the legislative branch and lacked a sufficient connection to any enumerated power. Consequently, the CTA was deemed unconstitutional without reaching a decision on whether it violated the First, Fourth, and Fifth Amendments. The court permanently enjoined the government from enforcing the CTA against the named plaintiffs and ordered a further hearing on the award of litigation costs. While the litigation may continue in the federal court system, this initial victory benefits small businesses by allowing them to set aside compliance with this now unconstitutional regulatory regime for the time being.

While this is or was not the hardest filing requirement that LLC and other reporting entities had to comply with, it’s always difficult to imagine if it would lead to more regulation, which is always a burden for businesses.

This stop to Congress’ ability to set hurdles for businesses is certainly welcomed by many; it should redirect anti-criminal government enforcement efforts to more efficient and fair policies with minimal or, preferably, no impact on businesses.

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