This week, the Main Street business community voiced its support the National Small Business Association’s lawsuit challenging the constitutionality of the Corporate Transparency Act (CTA).
The letter was signed by more than 45 trade associations, including the International Franchise Association, National Roofing Contractors Association, the National Association of Wholesaler-Distributors, and the Real Estate Roundtable. These trades represent businesses from every state and nearly every sector of the economy.
As the letter makes clear, the CTA is poorly constructed, overly burdensome, and threatens the owners of literally millions of small businesses across the country:
The CTA represents an unprecedented attempt by the federal government to gather the personal information of millions of law-abiding citizens and residents who own or control small businesses and other covered entities, disproportionately targeting our members and subjecting them to increased paperwork, privacy risks, and potentially devastating fines and prison terms.
It also is in clear violation of several fundamental constitutional principles, including the protection against unreasonable search and seizure:
…the CTA exceeds the confines of the Constitution by collecting, for law enforcement purposes, the personal information of millions of individuals without establishing any reasonable suspicion of wrongdoing.
The stated goal of the Corporate Transparency Act is to crack down on criminals who use shell companies to launder money. But the statute’s approach to combatting illicit activity relies on bad actors self-reporting their crimes, rendering it wholly ineffective. Criminals engaged in serious felonies are hardly going to worry about committing a simple paperwork violation. As a result, the law is unlikely to improve compliance while its burden will fall on legitimate businesses and their owners.
S-CORP and its allies have fought the CTA since it was first introduced. Unfortunately, the legislation was passed after being tucked into a broader defense spending bill back in 2020, in a process very similar to the one being attempted with the related ENABLERS Act.
The NSBA filed the lawsuit last month in the U.S. District Court for the Northern District of Alabama is our final attempt to put this harmful statute to rest. We’re confident the courts will recognize that the CTA is a blatant overreach of federal power and will strike it down. Expect to hear more on this front in the coming months.