Federal Court Strikes Down Corporate Transparency Act on Constitutional Grounds

A federal court has ruled that the Corporate Transparency Act (CTA) violates the Fourth Amendment, siding with a group of Michigan-based plaintiffs that challenged the law.

The plaintiffs, members of the Small Business Association of Michigan, a mix of Michigan nonprofits, limited liability companies, and individual business owners, argued that the CTA’s reporting requirements amount to an unreasonable search.

The court agreed, stating that while the CTA may have been designed with good intentions, its approach exceeds reasonable constitutional limits. The law mandates that small businesses report extensive personal and financial data, which is then stored explicitly for future law enforcement use. The estimated compliance cost for small businesses was expected to reach nearly $22 billion in its first year alone.

This ruling is a significant victory for small business owners, affirming their constitutional protections while highlighting the financial and regulatory burdens the CTA would have imposed. SBAM will continue to monitor legal developments and advocate for policies that support small businesses without unnecessary government overreach.

While we await further details on what this means, please note that FinCEN issued an update on reporting requirements late last week. SBAM’s guidance remains: no need to file at this point in time.