A U.S. District Court judge in Alabama recently ruled that the Corporate Transparency Act (CTA) is unconstitutional. The CTA, enacted on January 1, 2021, directs the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) to establish a nationwide database of beneficial ownership of certain corporations and other legal entities, including:
- Directors and board members of rental properties
- Investment corporations
- Development corporations
- Rental property managers
- Investment property managers
- Development property managers
As the recent injunction only applies to enforcement of the CTA against the plaintiffs in that particular case, other reporting companies are still technically bound by the CTA. Accordingly, landlords, corporate directors, rental property managers, etc. should continue to be prepared to comply until further notice.
More importantly, this decision will not be the end of the matter because:
- The U.S. government is likely to appeal this decision to the U.S. Court of Appeals for the Eleventh Circuit, and may seek an interim stay of the ruling from both the trial and appellate court;
- FinCEN may offer comments about the impact of the ruling on CTA implementation and enforcement in the coming days; and
- It is possible that this ruling will inspire “copycat” suits in other districts.
We all hope that the relevant Federal agencies and/or Courts of Appeal will resolve this issue as it applies to all reporting companies well before the initial filing deadline of December 31, 2024.
Also read: Federal Corporate Transparency Act: Impact on Landlords and Rental Property Managers https://www.ksnlaw.com/blog/federal-corporate-transparency-act-impact-landlords-rental-property-managers/
The District Court for the Northern District of Alabama was issued on March 1, 2024 and can be read here: https://storage.courtlistener.com/recap/gov.uscourts.alnd.183445/gov.uscourts.alnd.183445.51.0.pdf
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Contact our law firm if you have questions regarding the Corporate Transparency Act, reporting requirements, and the Act’s potential impact to your corporation or rental/investment/development company.
KSN can assist in preparing the documentation that complies with the Act including protocols to promptly learn about any updates to their Personally identifiable information (PII) that must be submitted within the required reporting timeframe.
You can reach KSN by calling 855-537-0500 or visiting our website at www.ksnlaw.com.
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