The Corporate Transparency Act (CTA) Deemed Unconstitutional March 1, 2024

 In Regulatory

BREAKING NEWS. The Corporate Transparency Act (CTA), P.L. 116-283 which went into effect on January 1, 2024 was deemed unconstitutional by a federal district court in Alabama on March 1, 2024. The federal district court granted the Plaintiff’s Motion for Summary Judgment in the matter of National Small Business United v. Yellen (N.D. Ala.). Under the CTA, certain reporting companies, such as some corporations, limited liability companies (“LLC”), or limited liability partnerships (“LLP”) were required to disclose information about the reporting company. They were also required to disclose who their beneficial owners are, including their full legal name, address, birth date and other personal details. Failure to file may have subjected the non-reporting individual/ company to a penalty of $500 per day and/or criminal prosecution, including a fine of up to $10,000 and/or up to two years in jail.

The goal of the CTA was to uncover money laundering and terrorist activities by requiring companies to report to the Department of Treasury, specifically the Financial Crimes Enforcement Network (“FinCEN”). The federal district court ruled while the goal of the CTA was “sensible” the act “exceeds the Constitution’s limits” of the legislative branch.

The future of the CTA is uncertain at this point as the federal government weighs its options in light of the federal court’s decision. Please contact the Attorneys at Law Offices of Lipsey & Clifford if you have questions.

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The Corporate Transparency Act (CTA) went into effect on January 1, 2024