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March 6, 2025
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Days after the United States Treasury Department and its Financial Crimes Enforcement Network (FinCEN) announced it was suspending enforcement the Corporate Transparency Act (CTA), (you can read about that in our last client alert) a federal judge in Michigan ruled in Small Business Association of Michigan, et al v. Yellen, et. al. (SBAM) that the CTA’s reporting requirements violated the Fourth Amendment of the U.S. Constitution.[1] Judge Robert Jonker of the United States District Court for the Western District of Michigan found that Beneficial Ownership Information (BOI) reporting requirements constituted an “unreasonable search prohibited by the Fourth Amendment” and issued an injunction that prohibits FinCEN from enforcing the CTA reporting requirements against any of the members of the Small Business Association of Michigan (pending further appeals).[2] Thus, while FinCEN is enjoined for the time being from enforcing the CTA against members of the Small Business Association of Michigan, all other reporting companies technically remain subject to the CTA and its BOI reporting requirements. But since FinCEN has suspended enforcement of its newly imposed March 21, 2025, reporting deadline by stating it would not impose penalties or fines on reporting companies who fail to timely file BOI reports and the Treasury Department has now announced its intention to issue a new rule that would narrow the BOI reporting obligations under the CTA to only foreign reporting companies, for now at least the impact that the SBAM ruling will have on reporting companies appears to be minimal.[3]

Several U.S. federal courts have heard cases involving the constitutionality of the CTA. Some, like SBAM, have concluded that the CTA, (or certain aspects thereof), is unconstitutional, while others have concluded just the opposite. Although the Supreme Court did not rule on the constitutionality of the law, it did lift a previous nationwide injunction on reporting requirements. These disparities have left many reporting companies dazed and confused to say the least. This ruling will only add to that confusion.

CTA Compliance Moving Forward Reporting companies are encouraged to continue monitoring the regulatory landscape surrounding the CTA. As soon as the Treasury Department proposes the new rule detailing the scope and applicability of the reporting requirements, we will update our clients further. Until then, reporting companies should consult their legal advisors to determine whether to file.

[1] Small Business Association of Michigan et al. v. Yellen et al., Case No. 1:24-cv-413 (W.D Mich 2025)

[2] Id. at 24.

[3] U.S. Department of Treasury, Treasury Department Announces Suspension of Enforcement of Corporate Transparency Act Against U.S. Citizens and Domestic Reporting Companies (Mar. 2, 2025), https://home.treasury.gov/news/press-releases/sb0038

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