My earlier blog post discussed National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.), the Northern District Court of Alabama decision that enjoined all relevant US government agencies from enforcing the Corporate Transparency Act (CTA). That post raised the issue: exactly who is entitled to the benefits of this injunction?
Well, let’s look carefully at what the court said:
“The Defendants, along with any other agency or employee acting on behalf of the United States, are PERMANENTLY ENJOINED from enforcing the Corporate Transparency Act against the Plaintiffs.”
Answer: The Plaintiffs — my guess was that the injunction applied to the National Small Business Association (Association) and its members (and the private individual who joined the lawsuit). I was hopeful that entities that were not current members of the Plaintiff Association could join it and be covered by the court’s holding. However, just yesterday, FinCEN dashed that hope. Plaintiff-wannabe’s stampeding to join the Association will not be protected from Beneficial Owner reporting obligations. At least, that is what FinCEN says. In a nutshell, per FinCEN, in order to be covered by the court’s holding, one had to be a member of the National Small Business Association as of March 1, 2024. What this means is that non-exempt “reporting companies” that are not plaintiffs in this case are not impacted by the decision and per FinCEN remain obliged to meet the beneficial ownership reporting and other requirements of the CTA. This would include the 90-day reporting deadline for entities formed in 2024.
Just to be clear, foreign entities can be subject to the CTA in a heartbeat. For example, registering with any state to do business there subjects the entity to CTA reporting. A rude awakening for many foreign investors to the USA.
Full text of the FinCEN Notice, below.
Again, let’s see how this plays out – appeal is inevitable.
Watch this space for developments. Subscribe to my blog Virginia – US Tax Talk , and my posts are delivered to your inbox free of charge.
Notice Regarding National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.)
Immediate Release
On March 1, 2024, in the case of National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.), a federal district court in the Northern District of Alabama, Northeastern Division, entered a final declaratory judgment, concluding that the Corporate Transparency Act exceeds the Constitution’s limits on Congress’s power and enjoining the Department of the Treasury and FinCEN from enforcing the Corporate Transparency Act against the plaintiffs. FinCEN will comply with the court’s order for as long as it remains in effect. As a result, the government is not currently enforcing the Corporate Transparency Act against the plaintiffs in that action: Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and members of the National Small Business Association (as of March 1, 2024). Those individuals and entities are not required to report beneficial ownership information to FinCEN at this time.
Posted: March 5, 2024
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