In a recent turn of events, an Alabama federal judge has declared the Corporate Transparency Act (CTA) of 2021 unconstitutional, bringing relief to only the plaintiffs in that lawsuit. This includes Isaac Winkles, his businesses, and 65,000 members of the National Small Business Association (NSBA). National Small Business United v. Yellen, 5:22-cv-01448 (N.D. Ala. 2024). This startling decision prevents the government from enforcing any provisions of the CTA against these plaintiffs.

The Financial Crimes Enforcement Network (FinCEN) swiftly announced its compliance with the ruling by refraining from enforcing the beneficial ownership information (BOI) reporting requirements on the plaintiffs. All others are still required to comply with the BOI reporting requirements.

The Alabama court decision is not likely the end of the story. The U.S. Department of Treasury is expected to appeal the decision to the U.S. Eleventh Circuit Court of Appeals. In addition, Congress can make very minor changes to the language of the CTA to make it constitutional, and will likely do so because the Alabama court gave it a roadmap to the changes needed.

Given the high probability of the CTA remaining enforceable, businesses are encouraged to comply with the existing BOI reporting requirements, unless explicitly exempted.

Please call Cantrell & Cantrell in Houston, Texas with any questions or concerns as to compliance with CTA or any other matter. We can be reached at 713-333-0555.