TheCorporateCounsel.net

Last Friday, the U.S. District Court for the Northern District of Alabama granted summary judgment to the NSBA in National Small Business United v. Yellen (N.D. Ala.; 3/24) — finding the Corporate Transparency Act unconstitutional.

Hughes Hubbard attorneys represented the NSBA in the case and the firm describes the lawsuit and the decision in this announcement.

On Nov. 15, 2023, NSBA filed suit in the Northern District of Alabama, alleging that the Corporate Transparency Act exceeded Congress’ Article I constitutional powers and infringed upon individual constitutional rights by forcing ordinary Americans to hand over sensitive, personal information to a Financial Crimes Enforcement Network (FinCEN) law-enforcement database. NSBA sought an immediate injunction against the implementation of the CTA and FinCEN reporting rules.

The order found that the CTA exceeds Congress’ authority under Article I of the Constitution and did not address the NSBA’s other challenges under the First, Fourth, and Fifth Amendments:

The court acknowledged that the ultimate policy goals of the statute, in terms of countering money laundering and terrorism financing, are laudable. But the court concluded that Congress cannot attempt to achieve laudable goals through means that are outside its powers under the Constitution—either because (as the court found) Congress is legislating activities like entity formation that the Constitution leaves to the states, or because (as NSBA also contended) Congress is forcing ordinary and innocent Americans to hand over personal and sensitive information to a database dedicated to criminal investigations even though those citizens have done nothing wrong and there is no reason to suspect that they have.

An appeal seems highly likely, so stay tuned!

Thanks to my former colleague Angela Gamalski of Honigman for sharing this update on LinkedIn over the weekend!

– Meredith Ervine