Corporate Transparency Act Ruled Unconstitutional by Alabama Federal District Court

On March 1, the Federal District Court for the Northern District of Alabama issued its decision in National Small Business United d/b/a National Small Business Association et al. v. Janet Yellen in her capacity as Secretary of the Treasury, et al., Case No. 5:22-cv-1448-LCB, finding that the Corporate Transparency Act (the CTA) is unconstitutional. The plaintiffs’ argument in the case was that Congress, in approving the CTA, acted outside its enumerated powers. The Federal District Court’s order, however, only granted relief to the plaintiffs, National Small Business Association (NSBA) and Isaac Winkles, a member of NSBA.

It is expected that the Department of Justice will appeal this decision and will continue to require all parties other than the plaintiffs in this case to continue to comply with the CTA. Assuming that turn of events, the CTA will remain in place until a more global decision on the merits is delivered. The likelihood of whether this decision will be affirmed or reversed by the 11th Circuit Court of Appeals is unknown. There will then be the possibility of the case being appealed to the U.S. Supreme Court.

Taft will continue to monitor this litigation and its implications on the future of the CTA.

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