A federal court judge in Alabama recently ruled that the federal Corporate Transparency Act (CTA), which we wrote about here, was unconstitutional. This marks the first judicial decision on the lawfulness of requiring small businesses to disclose their ownership to the federal government through the Financial Crimes Enforcement Network (FinCEN) system.
What’s the CTA?
As you know, the CTA requires businesses with fewer than 20 employees to provide names, dates of birth, addresses and other identifying information about its owners. This is part of an effort by the Department of the Treasury to identify and eliminate money laundering and other financial crimes.
What does this mean for you?
Well, if you’re a New York small business, nothing quite yet. The judge did not issue a broadly-applicable restraining order, instead limiting his ruling to the particular claimant that had brought the lawsuit. So the law still applies to you.
What’s next?
The likely next step is for the federal government to appeal the ruling. Given that Alabama is within the Eleventh Circuit Court of Appeals, the appellate court there likely will hear argument and decide about whether it agrees that the law is unconstitutional. Appeals can take some time, so we don’t expect a determination any time soon.
What should a NY small business do?
New York-based small businesses must comply with the law. If your business was formed and in existence before January 1, 2024, you have until January 1, 2025 to make your disclosures to FinCEN.
But if your business was formed during 2024, you must file your timely ownership reports within 90 days of formation unless or until the Treasury Department says otherwise.
If you have questions about this or other small business legal issues, contact The Coppola Firm at 716.839.9700 or info@coppolalegal.com. We’re here to help.
