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Alabama Federal Court Declares Corporate Transparency Act Unconstitutional

But the ruling is not applicable to all businesses

On March 1, 2024, a significant development arose in the ongoing saga of the Corporate Transparency Act (CTA). In a landmark decision, the U.S. District Court for the Northern District of Alabama, in National Small Business United d/b/a National Small Business Association v. Yellen, No. 5:22-cv-01448-LCB (N.D. Ala. 2022), ruled the CTA is unconstitutional and constitutes congressional overreach. This ruling has sent ripples through the business community, impacting both businesses formed before and after January 1, 2024.


The CTA, enacted in January 2021, aimed to increase transparency by requiring certain businesses to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). This information includes details about individuals who hold significant control, ownership, or economic benefits in the company.

What it Means:

The ruling will have little-to-no direct impact on most businesses as the ruling and its resulting injunction only applies explicitly to the plaintiffs in that case. Therefore, as a reminder:

  • Businesses Formed Before January 1, 2024 are allowed until December 31, 2024 to file their reports.
  • Businesses Formed After January 1, 2024 must report beneficial ownership information within 90 days of formation or public announcement.

“Wait and See” Approach (with Caution):

Given the uncertain future of the CTA, businesses may be able to adopt a cautious “wait and see” approach, with those formed prior to January 1,2024 having a bit more breathing room. Business owners and managers should:

  • Monitor legal developments: Stay informed by following legal news and consulting with legal counsel to stay updated on the CTA’s status.
  • Prepare for potential future compliance: Regardless of the court case, maintaining accurate records of beneficial ownership can be beneficial for future compliance with other regulations or good corporate governance practices.

Seek Professional Guidance:

Businesses with specific concerns or needing further clarification should consult with legal professionals. They can advise on the best course of action based on individual circumstances and the evolving legal landscape.


While the court’s decision offers some breathing room, the future of the CTA remains uncertain. It’s essential for all businesses to stay informed and consult with legal counsel to navigate this complex legal landscape effectively.

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