On March 6, 2024 we posted Federal Court Rules Corporate Transparency Act Unconstitutional - No Need to File BOI Just Yet where we discussed that in National Small Business United v. Janet Yellen, a Northern District of Alabama Federal Judge ruled on March 1, 2024, that the CTA was unconstitutional.
At first glance, the summary judgment could be read as banning the Treasury and any other agency of the federal government from enforcing the CTA. However, The court's ruling prohibits CTA enforcement only against the NSBA itself and all of its members.
The Treasury Department's Financial Crimes Enforcement Network made its interpretation of the ruling clear in a statement issued by FinCEN stated that the ruling applies (ONLY) to the plaintiffs.
At This Time."
Therefore all reporting companies facing CTA deadlines should seriously consider filing, even if the Federal District Court's ruling covers them. Businesses that fail to file in time to meet their CTA deadlines are betting on the NSBA prevailing in the courts.
Meanwhile, If The US Prevails, These Businesses Will
Potentially Face Significant Civil Fines, Interest, And Penalties, As Well As Possible Criminal Penalties, Including Jail Time.
Choosing to file means potentially losing their filing fees and any cost incurred if they decide to use an advisor. However, filing provides peace of mind, staying in CTA compliance means there's no chance of facing more stringent financial and criminal penalties for failure to file.
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The U.S. Department of the Treasury is moving quickly to appeal an Alabama federal judge's ruling that the Corporate Transparency Act is unconstitutional, filing a notice of appeal to the Eleventh Circuit on March 11, 2024.
ReplyDeleteTreasury's notice of appeal was filed just 10 days after this ruling.
A Treasury spokesperson said in a statement at the time that the department is complying with the court's injunction, noting, "Congress overwhelmingly voted to enact the bipartisan Corporate Transparency Act in 2021 to crack down on illicit shell companies and combat financial crime."
The recent rulings in the Firestone and NSBA cases, as well as several anticipated rulings in other pending cases across the country, emphasize a lack of clarity regarding the constitutionality of the CTA and its attendant reporting obligations. Even considering the possibility of an expedited ruling from the Eleventh Circuit in the NSBA case, there is unlikely to be any meaningful resolution of the CTA's constitutionality until the question is addressed by the U.S. Supreme Court.
ReplyDeleteConsidering this uncertainty, coupled with the growing number of states adopting CTA-inspired regulations, nonexempt reporting companies should immediately begin preparing to either complete and file their Beneficial Ownership Information Reports or face the potential consequences and regulatory scrutiny associated with noncompliance.