As the great Lee Corso would say on ESPN College Gameday, “Not so fast, my friend!” We recently sent out a Client Alert notifying you about the Corporate Transparency Act (“CTA”) that was to go into effect January 1, 2024.
On March 1, a U.S. District Court judge for the United States District Court for the Northern District of Alabama ruled that the CTA was unconstitutional. In a lengthy decision, the judge found that Congress exceeded its enumerated powers in the enactment of the law. The plaintiffs in the case were the National Small Business Association and one of its members who owns two small businesses.
The court decision is likely to be appealed to the Eleventh Circuit Court of Appeals and ultimately the U.S. Supreme Court. While we wait for this to play out in the appeals courts, we are left in limbo as to whether the CTA will ultimately be in place and where it currently stands. To be clear, the Alabama decision does not explicitly stop enforcement of the CTA beyond that Court’s jurisdiction.
For businesses formed prior to January 1, 2024, the CTA required the Beneficial Ownership Information (“BOI”) Report be filed by December 31, 2024. Given this court decision, it likely benefits business owners to wait until we get closer to that deadline to decide whether the law is in effect or not. For businesses created after January 1, 2024, the CTA had a 90-day filing deadline. For those businesses, it is more unclear as to whether you should go ahead and file or wait for more answers. To avoid risk, you should proceed as if the law stands. Hopefully, the appeals court and/or Congress moves quick to provide businesses more guidance on staying in compliance.
Questions?
If you have any questions, do not hesitate to reach out to us.
