Federal Judge Rules Corporate Transparency Act Unconstitutional, Enforcement Halted

In a ruling that came as a blow to regulatory bodies, the Federal District Court in Alabama has put a stop to the enforcement of the Corporate Transparency Act (CTA). The law, which came into force on January 1, 2024, has been at the forefront of the U.S. government’s battle against money laundering.

The CTA is designed to stop money laundering through increased transparency by creating a beneficial ownership database with reporting requirements that disclose beneficial owners of certain U.S. companies and non-U.S. companies doing business in the U.S.

This past Friday evening, March 1, 2024, a Federal District Court judge in the Northern District of Alabama granted a motion for Summary Judgment, which effectively declared the Corporate Transparency Act (CTA) unconstitutional. The Court stated that the enactment of the CTA “cannot be justified as an exercise of Congress’ enumerated powers.” The decision prevents the government from enforcing the CTA against the Plaintiff in the case. The Court stated that it will separately issue a final judgment.

As a result, it appears that the enforcement of the CTA may be on hold. The Justice Department is highly likely to appeal the Alabama case.

Marcum will continue to monitor the effect of this ruling and the impact it may have.