Court Upholds Constitutionality of Corporate Transparency Act
The U.S. Court of Appeals for the 11th Circuit recently upheld in National Small Business United, et al. v. U.S. Department of the Treasury, et al. that the Corporate Transparency Act (CTA) is a constitutional exercise of Congress’ power under the Commerce Clause of the U.S. Constitution. The court also ruled that the CTA does not violate the Fourth Amendment, which the National Small Business Association (NSBA) had claimed in the case.
In 2024, the U.S. District Court for the Northern District of Alabama agreed with the NSBA, who represented approximately 65,000 small businesses in the case. The district court ruled that Congress had exceeded its authority in adopting the CTA by regulating the “non-commercial act of incorporation.” The government then appealed the decision.
Signed into law in 2021 as an anti-money-laundering initiative, the CTA mandated beneficial ownership information (BOI) reporting, requiring that information about an entity’s beneficial owners, i.e., the individuals who ultimately own or control it, be reported to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
In March 2025, the Treasury issued an interim final rule limiting the scope of the BOI reporting requirements to foreign-owned entities. The interim final rule is yet to be finalized.