What happened?

On March 1, 2024, a federal district court in Alabama held the Corporate Transparency Act (“CTA”) – federal legislation that requires businesses to submit beneficial ownership information reports (a “BOI Report”) – to be unconstitutional. In this particular case, the National Small Business Association sought injunctive relief which would prevent the application of certain rules promulgated by the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) aimed at the collection of beneficial ownership information from certain small businesses. The court sided with the National Small Business Association, noting that “the CTA exceeds the Constitution’s limits on the legislative branch and lacks a sufficient nexus to any enumerated power to be a necessary or proper means of achieving Congress’ policy goals.”

What should my business do?

Until further guidance is provided, your business should continue to comply with all of the requirements imposed by the CTA. The decision by the Alabama federal court holding the CTA unconstitutional applies only to the plaintiff in that matter – the National Small Business Association. In other words, if your business is considered a “reporting company” under the CTA, you should plan to file a timely BOI Report. The filing deadlines are as follows:

  • Reporting companies in existence prior to January 1, 2024, will have until January 1, 2025, to file an initial BOI Report.
  • Reporting companies formed on or after January 1, 2024, will have 90 days to file an initial BOI Report.
  • Reporting companies formed on or after January 1, 2025, will have only 30 days to file an initial BOI Report.
  • Reporting companies are required to report any change in previously reported information, which must be filed within 30 days after such change occurs.

A Rhoades McKee attorney can assist you with determining your obligations under the CTA.

What happens next?

It is unclear what will happen next. FinCEN has invested significant resources into the development and enactment of the CTA, so an appeal by the U.S. Department of Treasury to the U.S. Court of Appeals for the Eleventh Circuit is likely. FinCEN has acknowledged the Alabama court’s ruling and has stated that it will not enforce the CTA against the plaintiffs in that action. This ruling by the Alabama court may also encourage the filing of similar suits in other jurisdictions.

What if I have more questions?

The Rhoades McKee Team is available to advise you on compliance issues related to the CTA and discuss how those issues impact your business. Future updates are expected in light of this ruling, and Rhoades McKee will continue to monitor developments as they arise.

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