Skip to main content
Join Now

< Back to All

SBAM Taking Legal Action Against Corporate Transparency Act

March 26, 2024

The Small Business Association of Michigan is taking legal action against the invasive and unconstitutional Corporate Transparency Act

This is on the heels of a March 1, 2024 ruling by the U.S. District Court for the Northern District of Alabama that held the Corporate Transparency Act is unconstitutional. Subsequently, decisions were issued that the CTA cannot be enforced against the specific plaintiffs (National Small Business Association and its dues-paying members). All other businesses subject to the CTA must still comply.

Today SBAM filed our lawsuit challenging the CTA because we believe the following:
  1. The CTA unlawfully authorizes the search and seizure of the sensitive, personal information belonging to millions of innocent small business owners and employees without any suspicion of wrongdoing. The CTA requires millions of law-abiding Americans to provide a federal law enforcement agency with their names, addresses, and passport or driver’s license information and to identify all of the organizational entities over which they exercise “substantial control.” The CTA authorizes the federal government to share that information with other law enforcement agencies—including foreign governments—even if the government has no reason to suspect any wrongdoing.
  2. The CTA exceeds the bounds of Congress’ legislative authority.Congress may only legislate within the specific powers granted to it in the Constitution. None of these powers give Congress the authority to enact the CTA.
    • The CTA’s requirement to report kicks in the moment the entity is formed under state law. This means that the CTA sweeps up entities simply because they are formed—and not because they engage in any activity at all.
    • Congress’ national security power does not allow Congress to compel comprehensive data disclosure from law-abiding American citizens just because the law aligns with a foreign-policy goal or promotes “security” in a general sense.
    • Congress’ power to tax does not justify the CTA’s sweeping intrusion into Americans’ sensitive information related to beneficial ownership of entities.
  3. The CTA is unconstitutionally vague and imposes criminal penalties. The CTA imposes felony penalties – up to a 2-year prison sentence and heavy fines – on any “person” who willfully fails to report the “beneficial owner” information to the designated federal law enforcement agency. But the CTA is not clear about who meets the definition of a “beneficial owner,” because it defines “beneficial owner” as someone who exercises “substantial control” over the entity.
What’s next?

As of today, all businesses subject to this new law, with the exception of dues-paying members of NSBA, must comply with the Corporate Transparency Act.

All new businesses formed on January 1, 2024 or after have 90 days in which to file; all other businesses have until December 31, 2024.

If SBAM’s legal challenge is successful, we are hopeful that our dues-paying members at the time of a court decision will be included in the injunction. However, until a decision is issued, we recommend compliance with the CTA.

More on the Corporate Transparency Act:

Click here for more News & Resources.

Share On: