Effective January 1, 2024, the CTA introduced a new filing requirement for various business entities, particularly smaller privately held companies. However, the legal landscape took an unexpected turn on March 1, 2024. In the U.S. District Court for the Northern District of Alabama, a federal judge declared the CTA unconstitutional as a matter of law.
While the recent court ruling has limited implications, it underscores the importance of staying informed about the CTA. Here’s what you need to know about this significant development:
Case Background: The case, titled National Small Business United v. Yellen, challenged the constitutionality of the CTA. The court concluded that the CTA exceeded the Constitution’s limits on congressional authority. Specifically, the court characterized the CTA as regulating incorporation—an area considered a “purely internal affair.”
The court found that incorporation is neither clearly economic nor commercial in nature and is too incidental to tax administration.
Narrow Impact: As a result of this court decision, the CTA currently remains in full effect except for members of the National Small Business Association (NSBA) and possibly reporting companies within the Northern District of Alabama.
For entities outside this specific scope, compliance with the CTA remains mandatory.
