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Corporate Transparency Act Found Unconstitutional

On March 1, 2024, following a challenge to the constitutionality of the Corporate Transparency Act (“CTA”) by the National Small Business Association, a Federal District Court Judge in Alabama ruled that “the [CTA] is unconstitutional because it cannot be justified as an exercise of Congress’ enumerated powers.” In the ruling, the Judge ordered that the Federal government is permanently prohibited from enforcing the CTA against the National Small Business Association and the other plaintiffs in that suit.

As is common in this type of litigation, we expect that the government may appeal this ruling. In addition, while not explicit in the ruling, we expect that the Court’s rationale and decision in this case will apply nationwide resulting in a temporary halt to enforcement of the CTA as appeals are considered.

We will continue to monitor developments in this case and provide additional information as necessary.

Please contact an attorney from our Business Planning & Transactions Practice Group to discuss how this ruling may impact you, your business, or your clients.