In recent months, Dahl Law Group has extensively covered the enactment and implementation of the Corporate Transparency Act (CTA), a new law that, starting January 1, 2024, mandates qualifying businesses to disclose beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). The aim of the new law, according to the federal government, is to cut down on financial crimes such as money laundering. Existing entities were given a deadline of January 1, 2025, while new entities have until 30 days after incorporation to provide the necessary information.
Now, however, the enforceability and constitutionality of the law is in question after a recent verdict from the U.S. District Court for the Northern District of Alabama.
National Small Business Association v. Yellen
The case in question, National Small Business Association (NSBA) v. Yellen, originated from a small business advocacy group claiming these new reporting requirements overextended Congress’ powers and violated the First, Fourth, and Fifth Amendment Rights of its members. The judge agreed with the Plaintiff who had sued the U.S. Treasury Department to prevent enforcement against members of the association.
While the judge did rule that enforcement of the CTA is an overreach of Congress’ legislative authority, it did not rule on whether the law violates the First, Fourth, and Fifth Amendment Rights.
What Does This Mean for California Businesses?
Ultimately, the immediate impact is minimal in this case. FinCEN quickly responded with a notice of appeal while acknowledging they would comply with the court’s ruling in the meantime. The court’s ruling applies narrowly to the members of the NSBA and none further. This means any other businesses that are not a part of the association will still need to follow the reporting requirements under the CTA.
We are, however, keeping an eye on the possibility of other challenges to the constitutionality of the CTA. It’s possible this inspires other lawsuits that could alter or completely halt the enforcement of the reporting requirements within the law. As with many new laws, it’s imperative that businesses and their attorneys understand the latest updates and changes as they develop in order to properly proceed and remain in compliance with the latest version of any laws.
Stay Up to Date With Dahl Law Group
At Dahl Law Group, we are a team of legal professionals who remain in touch with the current legal landscape on behalf of our many clients and partners. In our opinion, it’s in the job description of any law firm and lawyer to stay connected with relevant laws, statutes, procedures, and legal cases that directly impact their clients. We will keep you updated on the status of this law as it changes and ensure your business is in compliance with the current standards of the law. If you’re unsure where your business stands, contact Dahl Law Group to stay up to date and find peace of mind.
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