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Late this past Friday, a U.S. District Court Judge in the Northern District of Alabama issued a ruling in favor of the National Small Business Association holding that the Corporate Transparency Act (“CTA”) exceeds the limitations that the Constitution places on Congress’s power. In other words, this judge found the CTA to be unconstitutional. The court ordered that the government could not enforce the CTA against the plaintiffs in this particular case, which likely benefits all of the plaintiff’s 65,000-plus members. The court did not issue a nationwide injunction, but the court’s decision could pause the government’s ability to enforce compliance.

The government will likely request a “stay” of the decision, meaning a request to suspend the result of the court order. The government has 60 days to appeal the decision to the U.S. Court of the Appeals for the Eleventh Circuit in Atlanta.

This litigation will continue through the federal court system, but the initial decision was favorable to businesses covered by the CTA. As of today, absent new information, the safest course of action is to comply with the CTA for entities formed in 2024, which means a reporting company must file the Beneficial Ownership Information Report within 90 days after its formation. (Entities that were formed prior to 2024 have until January 1, 2025, to file their initial reports.)