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The Constitution and the Corporate Transparency Act

J. Bradley Klepper
Attorney at Law

As I mentioned last month, I am, and always have been, a big fan of surprises.

The good surprises I mean. Things liking finding an extra $20 in your jean pocket, or having a friend say, “drinks are on me.” These always bring a smile to my face … even though the latter sometimes leads to regrettable life choices on my part. But I digress.

Well, I recently got a surprise (kinda/sorta) the other day from the U.S. District Court for the Northern District of Alabama regarding the Corporate Transparency Act (“CTA”).

Some of you (like maybe 2 of you) may recall that I wrote about this last month and may even recall what the hell the CTA is and does.

For the rest of you, a little refresher … the Corporate Transparency Act (“CTA”) was enacted in 2021, went into effect on January 1, 2024. The goal of the CTA is to catch things like tax fraud, money laundering, and financing of terrorism by gathering additional ownership information on certain U.S. businesses operating in or access the country’s market. According to Congress, the CTA will prevent folks from hiding or benefiting from ownership of U.S. business to conduct illegal operations. Per Congress, this is a widely used tactic by bad actors that impacts national security and economic integrity.

Oh yeah, now I remember. But how does it work again? Well, I am glad you asked……

Starting on January 1, 2024, damn near all small businesses will be required to file a Beneficial Owner Information (“BOI”) report with the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) identifying individuals associated with the reporting company.

Well … great, you say. But is this going to impact me? Unfortunately, the answer is most likely YES!

To be perfectly honest, and according to some sources, this will currently impact about 30 million businesses. However, it will not impact members of the National Small Business Association (members as of March 1, 2024).

I can almost hear you saying it now…” What the hell?” How come they got off from having to comply with the requirements of the CTA. Well, SURPRISE! The aforementioned Alabama Federal Court found that the CTA was unconstitutional, and the government was permanently enjoined from enforcing it against the Plaintiff (the NSBA and its members as of March 1, 2024). Here comes the good part. The Court’s ruling only applies to the plaintiffs to that particular lawsuit. In other words, if you were not a party to that lawsuit the clock is ticking, and the filing requirements of the CTA may still apply to you.

Without getting to far into the weeds, the plaintiffs basically argued that it was an invasion of privacy, created too much of a burden on small businesses and that the CTA exceeds the Constitutions limit on Congress’ power.

In response, the government said nuh-uh. Ok, maybe not exactly. They argue that Congress had the authority to do this under Plenary Power of Congress to Conduct Foreign Affairs, the Commerce Clause and the Taxing Power and Necessary and Proper Clause.

I could go into detail about the arguments made regarding each of these, but we definitely do not have the space. And to be honest, it could trigger my recurring nightmares about law school, and I don’t need that. If you really want to know, come find me at a conference and we can discuss it. I am confident you will regret asking me about it.

So where does that leave us now?

Well, at the present time, not much has changed for most small businesses. According the FinCen, the decision only applies to 0.1% - 0.2% of the over 30 million firms that will be required to file. So unless you are in that very small percentage still plan on filing.

It is also highly likely (like I would bet my house on it) that the government will appeal the decision in its entirety to the Eleventh Circuit Court of Appeals.

In addition, I think Congress will tweak the language a bit to overcome any objections the court had. Even the court noted that this should not be too hard to do. Of course, it won’t get done this year because it is an election year. And we all know nothing gets accomplished in an election year. Nothing gets done in the years between elections either but…

Of course, there are a few exemptions to the CTA filing requirements (other than being a party to the Alabama lawsuit) and this article does contain all the details, so I suggest you review the CTA yourself or consult with a professional.

Brad Klepper, Esq. is President of Interstate Trucker Ltd., a law firm entirely dedicated to legal defense of the nation's commercial drivers. Interstate Trucker represents truck drivers throughout the forty-eight (48) states on both moving and non-moving violations. Brad is also Executive Vice President & General Counsel of Drivers Legal Plan, which allows member drivers access to his firm’s services at greatly discounted rates. Brad spent almost a decade with the largest law firm in Oklahoma where his practice included extensive experience in transactional law, business defense litigation, and intellectual property. In addition, Brad is a licensed architect and serves as General Counsel to the Oklahoma Board of Architects, Landscape Architects and Interior Designers. Brad has dedicated much of his time to DataQs challenges, which are challenges posed to the FMCSA for CSA incidents, to examine data and reports filed by law enforcement.

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