According to Forbes, the U.S. Court of Appeals for the 11th Circuit just ruled the Corporate Transparency Act (CTA) is constitutional, reversing a March 2024 decision from an Alabama district court that had gutted it. The law, passed as part of the 2021 National Defense Authorization Act, requires about 32 million companies to report beneficial ownership info—like names, birthdates, addresses, and ID scans—to the Treasury’s Financial Crimes Enforcement Network (FinCEN). Penalties for willful non-compliance are steep: up to $500 daily in civil fines and criminal penalties of two years imprisonment plus a $10,000 fine. Despite this court win, the Treasury Department had previously announced domestic businesses didn’t have to comply, exempting about 99% of impacted companies. The National Small Business Association, which brought the original suit, called the ruling “very disappointing” and is pushing Congress for a full repeal.
What the ruling actually says
So, the court had two big questions to answer. First, does Congress even have the power to pass this law? And second, does it violate the Fourth Amendment against unreasonable searches? On the power question, the court said yes—basically, anonymous shell companies are a huge interstate commerce problem. All that illicit money flowing around? It crosses state lines constantly. Regulating that is squarely within Congress’s Commerce Clause power. On the Fourth Amendment, the court said no violation. Here’s the thing: the CTA is a uniform reporting rule. It’s not a search. Everyone has to file the same info; there’s no discretion for agents to go digging based on a hunch. It’s a paperwork mandate, not a raid. That distinction mattered to the judges.
Why this is still a mess
Look, the big elephant in the room is Treasury’s non-enforcement stance. They said most companies don’t have to comply. But that’s just a policy choice for *this* administration. The law itself is still on the books. A future administration could flip a switch and start enforcing it aggressively. And now with a favorable appellate ruling in hand, that becomes a lot more plausible. It creates this weird limbo for business owners and their advisors. Do you spend the time and money to gather all this sensitive personal data and file it, just in case? Or do you bet that the political winds won’t change? It’s a headache. And it’s the kind of regulatory uncertainty that drives small business owners nuts.
The broader fight over transparency
The reactions tell you everything about the deep divide here. Transparency advocates like Transparency International U.S. are celebrating, calling the ruling a collapse of the “constitutional case for corporate secrecy.” They argue this is a critical national security tool against money laundering and sanctions evasion. But the small business lobby sees a massive, unfair burden being dumped on them to police global financial crime. Todd McCracken of the NSBA said it plainly: they support fighting money laundering, but “we cannot allow the federal government to charge small businesses with the enforcement of it.” That’s the core tension. Is this a reasonable anti-crime measure, or is it an unfunded mandate that turns every mom-and-pop LLC into a de facto arm of the Treasury?
What happens next
Don’t think this 11th Circuit ruling is the final word. Far from it. Similar cases are pending in other circuit courts—the 4th, 5th, and 9th. We could easily see a “circuit split,” where different appeals courts rule differently on the same law. That’s basically a one-way ticket to the Supreme Court. So the constitutional fight is alive and well. The other path is Congress. The NSBA is now laser-focused on getting lawmakers to repeal the CTA entirely. But given that it passed with strong bipartisan support just a few years ago, is that likely? I’m skeptical. The political appetite for being “soft on shell companies” is pretty low. For now, businesses are stuck in a holding pattern, watching the courts and waiting for the other shoe to drop. My advice? Talk to your lawyer. This saga is nowhere near over.
