Boulder Estate Planning Legal Blog
In a March 1, 2024 ruling, the U.S. District Court for the District of Alabama deemed the Corporate Transparency Act (CTA) unconstitutional. In the wake of this decision, small business owners are asking how the ruling will affect their businesses and how they should move forward in alignment with the ruling. On today’s blog post, we take some time to walk you through the basics of the Court’s decision and discuss its possible implications, both today and further down the road. As always, if you have questions about how this post might or might not apply to you, contact an experienced Boulder estate planning attorney that can tell you more about the District Court’s ruling in this case and its possible implications moving forward.
What is the Corporate Transparency Act and Who Must Comply with the Act?
The CTA requires certain businesses to submit “beneficial ownership information” (BOI) to the U.S. Department of Treasury’s Financial Crimes Enforcement Network. The Act’s purpose is to ensure that businesses are above board, in that they are not engaging in illicit activities such as tax evasion and money laundering. Importantly, only certain kinds of businesses most comply with the CTA – these businesses include LLCs, corporations, and some other entities formed through filing with a Secretary of State. To check if your business is required to report under the CTA, you can either speak with a trusted attorney or look closely at the CTA’s requirements on the Department of Treasury’s website.
The CTA lays out important details such as reporting deadlines, reporting requirements, and penalties for non-compliance. In order to comply with the Act, businesses can face average costs of $8,000 within the first year of reporting, which can be a huge lift for smaller businesses. When businesses send in information according to the Act’s requirements, the information is not made public; instead, the government uses the information to monitor possible illicit business activities.
What Happened in the District Court’s March 2024 Ruling?
In the Court’s ruling, the CTA was declared unconstitutional. Under the U.S. Constitution, Congress cannot pass laws that lack “a strong connection to any enumerated power to serve as a necessary or appropriate mans to achieve Congress’s policy objectives.” In short, the Court determined that Congress is acting outside of its constitutional power in implementing the Act, unfairly burdening businesses by making them reveal excessive and personal details about their work. The Act does not hold a strong enough to any real policy objective, and, given its failure to meet this basic constitutional requirement, it exceeds the Congress’s legal authority.
How Does the Ruling Affect Businesses Today?
The Court’s ruling does not yet affect businesses that have to report under the CTA. For the moment, the decision only applies to businesses directly involved in the case, which includes the National Small Business Association and members of the National Small Business Association. This conglomerate of businesses makes up approximately 0.1%-0.2% of small business owners in the country. For now, the other 99.9% of business owners should continue reporting under the CTA as normal. These reporting requirements could, however, change in the future.
How Could the Ruling Affect Businesses Going Forward?
The real implication of the ruling lies in how it might affect businesses moving forward. The decision exists within an already heated debate around the tension between regulatory oversight and constitutional freedoms in this country. On the one hand, the government wants to ensure that businesses are complying with all of its rules and regulations. On the other hand, it costs time and money to comply with the CTA, and businesses do not generally want the government privy to their personal details, especially when they are already working hard to stay in compliance with the Department of Treasury’s requirements.
The District Court ruling is likely to be appealed, meaning the U.S. Supreme Court could end up looking further into the case. If this happens, a SCOTUS decision would have far-reaching effects for businesses across the country, especially as the larger debate about regulation v. privacy continues to play out on the national stage.
How Can Businesses Stay Up to Date on the CTA in the Future?
As soon as the District Court issued its opinion, the U.S. Department of Treasury Financial Crimes Enforcement Network (FinCEN) issued a statement, laying out what the ruling means for those involved in the case and those not involved. For updates, you should monitor FinCEN’s website to track any information released.
Additionally, it is smart to speak with an estate planning attorney that can help you figure out how these kinds of rulings affect you and your estate. With so many moving targets, it is important to stay abreast of changes in case law and legislation, especially when penalties for non-compliance can be devastating for small businesses. If you have questions about how CTA enforcement is changing and what that means for you, call a trusted Boulder estate planning attorney that can interpret these changes and apply them to your business.
Speak With a Boulder Estate Planning Attorney Today
If you have questions about the CTA, the District Court case, or other regulations that might apply to your business, contact the Braverman Law Group today. At the Braverman Law Group, we understand that it can be difficult to keep up with how the law changes over time. Our Boulder, Colorado lawyers are experts in monitoring these developments and helping clients understand how the changes affect their individual circumstances. At the same time, you should always be thinking about how changes in your business might affect your estate plans, and our team of Boulder estate planning attorneys can walk you through that process during an initial or future consultation.
For a free, no-obligation consultation with a Boulder estate planning attorney that has your best interest in mind, give our office a call today at (303) 800-1588. If you prefer, you can also fill out our online form to tell us about your legal issue and have a member of our team reach back out to you as soon as possible.
