A U.S. District Court in Alabama has determined that Congress overstepped its constitutional authority in passing the Corporate Transparency Act (“CTA”) (see National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.)). The CTA requires the disclosure of the Beneficial Ownership Information (“BOI”) of millions of American corporations, limited liability companies, and other entities.
In the wake of this decision, FinCEN seems to have accepted the decision but only insofar as it affects its enforcement of the CTA against the named plaintiffs. The reporting obligations for the remaining 30 million or so entities is unchanged. Time will tell if FinCEN will appeal the decision and/or how it will deal with the seemingly inevitable series of similar cases that will start filling up courts across the country.
At present, we encourage businesses and other entities to continuing collecting the information necessary to complete their BOI report. Especially, as we approach the earliest deadline for filing a BOI report at the end of this month (for entities that were created on January 1, 2024, the 90-day filing deadline would be March 31, 2024). As always, businesses and business owners should consult with knowledgeable counsel prior to taking (or not taking) any action that carries the threat of criminal penalties, such as the CTA’s $10,000 fine and up to two years in jail.
This alert serves as a general summary and does not constitute legal guidance. Please contact us with any specific questions.
Robert D. Burgee is an attorney at Fraser Trebilcock with over a decade of experience counseling clients with a focus on corporate structures and compliance, licensing, contracts, regulatory compliance, mergers and acquisitions, and a host of other matters related to the operation of small and medium-sized businesses and non-profits. You can reach him at 517.377.0848 or at bburgee@fraserlawfirm.com.