Kenneth Duvall, with Bilzin Sumberg. One Court Has Said the Corporate Transparency Act is Unconstitutional; What Happens Next?
In the wake of other, significant changes in the law at the Supreme Court in recent years—from Citizens United on campaign finance and Shelby on civil rights law to Bremerton on religious freedom and Dobbs on abortion—only time will tell whether the CTA will survive intact.
April 01, 2024 at 09:45 AM
5 minute read
Board of ContributorsOn March 1, 2024, a federal judge in Alabama concluded that the Corporate Transparency Act is unconstitutional. Let us examine the content, scope, and possible future of this ruling in NSBU v. Yellen, No. 5:22-cv-1448, 2024 BL 69366, 2024 Us Dist Lexis 36205 (N.D. Ala. Mar. 01, 2024). In a 25-page order, Judge Liles Burke rejected all of the federal government's arguments that the CTA is constitutional. The government had argued that the CTA is grounded in the foreign affairs and national security powers, the commerce clause, and the taxing clause, all buttressed by the necessary and proper clause.
First, Judge Burke found that the CTA was not a valid exercise of the federal government's foreign affairs and national security powers because such "powers do not extend to purely internal affairs, especially in an arena traditionally left to the states." The "internal affair" at issue is the regulation of entity incorporation, which Judge Burke found was historically an issue for the states, not the federal government.
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