In this blog post, we’re tackling a critical issue: the dangers of making decisions solely based on headlines. We live in an age where news flashes across our screens at lightning speed, and it’s easy to fall into the trap of skimming headlines without delving into the details. Let’s explore a recent example that underscores the importance of looking beyond the surface.
A few months back, we discussed the Corporate Transparency Act (CTA) on our podcast. This landmark regulation mandates millions of companies across the United States to disclose additional beneficial ownership information to the government. However, a recent development has thrown a curveball into the mix.
On March 1, 2024, U.S. District Court Judge Liles C. Burke issued a momentous ruling. In a 53-page opinion, Judge Burke granted summary judgment for the National Small Business Association (NSBA), declaring the CTA unconstitutional and permanently halting its enforcement against the plaintiff. This ruling stemmed from a lawsuit filed by the NSBA in 2022, arguing that the CTA unfairly burdens small businesses by compelling them to disclose sensitive details to FinCEN, with potential compliance costs soaring as high as $8,000 in the initial year alone.
Judge Burke’s ruling articulated that the CTA exceeds the bounds set by the Constitution on the legislative branch, lacking a solid connection to any enumerated power necessary to achieve Congress’s policy objectives. While the court did not delve into potential violations of the First, Fourth, and Fifth Amendments, the focus was on Congress overstepping constitutional boundaries.
At first glance, the summary judgment might seem to bar the Treasury and other federal agencies from enforcing the CTA altogether. However, the court’s ruling applies solely to the NSBA and its vast membership base, estimated at over 60,000. The ban on CTA enforcement is limited to these members, a fraction of the millions of businesses subject to compliance.
With the narrow scope of this summary judgment in mind, it’s important to recognize that the majority of businesses remain obligated to file CTA beneficial ownership information reports unless the Treasury Department universally suspends enforcement. The Treasury is anticipated to appeal the summary judgment to the Eleventh Circuit Appeals Court, with the case likely destined for the U.S. Supreme Court, regardless of the appellate outcome.
What the CTA ruling means for small businesses?
