A federal court in Alabama has ruled the Corporate Transparency Act unconstitutional, following a challenge by the National Small Business Association. The law, aimed at combating money laundering by requiring businesses to report owners and beneficial owners to the Financial Crimes Enforcement Network, has been criticized by small business advocates as overly burdensome.
The ruling, issued on March 1, is seen as a victory for the NSBA, which represents over 65,000 small businesses. The Justice Department has announced plans to appeal the decision.
Under the Corporate Transparency Act, an estimated 32 million small businesses would be required to provide personal information, including photo ID and home address, to FinCEN. Critics argue that the reporting requirements represent congressional overreach and impose unnecessary administrative burdens on small businesses.
Existing businesses have had their reporting deadline extended to January 1, 2025, while new businesses must comply within 90 days of creation. NSBA President and CEO Todd McCraken expressed relief at the court's decision, stating that the CTA is not only burdensome but also raises constitutional concerns.
This ruling is expected to have significant implications for small businesses across the country, as they navigate compliance with federal regulations and reporting requirements. The debate over the balance between combating money laundering and protecting small business interests is likely to continue as the legal battle unfolds.
