There are lawsuits in multiple federal districts challenging the constitutionality of the Corporate Transparency Act (“CTA”). The first, on March 1, 2024, declared the Corporate Transparency Act to be unconstitutional because it “exceeds the Constitution’s limits on the legislative branch and lacks a sufficient nexus to any enumerated power to be a necessary or proper means of achieving Congress’ policy goals.” Nat’l Small Bus. United v. Yellen, 2024 U.S. Dist. LEXIS 36205 (N.D. Ala. 2024), on the grounds that Congress lacked the authority to enact the CTA. The government has appealed this ruling, and the Eleventh Circuit heard oral arguments on Friday, September 27.
As our Firm stated previously, the National Small Business Association (“NSBA”) and one of its individual members filed a lawsuit in the Northern District of Alabama challenging the constitutionality of the CTA, arguing that Congress lacked the authority to enact this legislation. The District Court held that the CTA was unconstitutional and enjoined its enforcement against the plantiffs.
Recently, a U.S. District Judge for the District of Oregon rejected a motion for a preliminary injunction to block enforcement of the CTA on constitutional grounds, finding that plaintiffs had failed to show: (1) a likelihood of success on the merits, (2) a likelihood of irreparable injury, and (3) that the balance of hardships tips sharply in their favor. Firestone v. Yellen, Docket No. 3:24-cv-01034 (D. Ore.). Although the District of Oregon did not issue a dispositive ruling on the merits, due to the procedural posture of the case, the tenor of the opinion strongly suggests that the plantiffs’ lawsuit faces an uphill battle, at best.
Given the penalties for non-compliance with the CTA and the current litigation, entities must take action to comply with the CTA. Although it is possible that a circuit split could develop, and that the U.S. Supreme Court could ultimately address and resolve the constitutionality of the CTA, the law remains in force.
If you’re interested in learning more about how the new CTA may affect your company or how to comply with it, contact Eric Thomas at ethomas@lynchlaw-group.com or by calling (724) 776-8000.
