US Department of Treasury Appeals Alabama Corporate Transparency Act (CTA) Ruling

Avatar photo
Posted on March 13, 2024 by Elisa Jean-Newman in Business Compliance.

The US Department of the Treasury is taking steps to defend the CTA following a ruling by an Alabama federal judge deeming it unconstitutional. Ten days after the ruling, the Department lodged an appeal with the Eleventh Circuit on Monday, demonstrating its dedication to upholding the law and safeguarding the American public against financial crimes.

The CTA mandates that over 30 million businesses operating in the US report and keep current beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), a division of the Treasury Department. The reported information will aid government officials in detecting tax evasion, money laundering, and other illicit activities conducted by shell companies. Enacted in 2021 with bipartisan support, this law aims to combat unlawful practices and safeguard small businesses.

The Department of Treasury is confident in interpreting the Constitution’s necessary and proper clause, which they argue justifies the CTA. They view this law as a crucial and effective tool for achieving Congress’ policy objectives and ultimately benefiting all Americans. Regardless of how the Eleventh Circuit Court rules, this case may go to the US Supreme Court.

The summary judgment issued by the Alabama district court had a limited impact on only about 60,000 entities out of the 30+ million entities affected by the CTA. Due to its restricted reach, it seems unlikely the CTA will be suspended while the appeals process is ongoing.

It’s widely believed that all companies that have to report BOI should file before the deadline. It is highly recommended that businesses take this matter seriously. If a company fails to file within the specified time, it might face significant civil fines and penalties, including jail time.

Harbor Compliance’s BOI Reporting Service can guide you through filing your BOI report with FinCEN, not just this year, but whenever you need to file updated reports with FinCEN.