In the 53-page opinion released late on Friday, March 1, U.S. District Court of Alabama Judge Liles C. Burke granted summary judgment, ruling that CTA is indeed against the Constitution and permanently enjoining the government from enforcing the CTA against the plaintiff. "The law packs a significant regulatory punch, requiring most entities incorporated under State law to disclose personal stakeholder information to the Treasury Department's criminal enforcement arm," Burke said in his decision. "The connection between incorporation and criminal activity is far too attenuated to justify the CTA. Indeed, if such an attenuated connection were enough, Congress' commerce powers would be functionally limitless."
In their lawsuit titled "National Small Business Association v. Yellen," the NSBA contended that the CTA unfairly burdens small businesses by requiring them to divulge "highly personal" details to the Department of Treasury's Financial Crimes Enforcement Network (FinCEN). "CTA was signed into law Dec. 2020 and is set to go into effect in a matter of months. This law will require certain businesses with fewer than 20 employees to disclose beneficial owners’ information to the FinCEN," the NSBA website included. "While we support the goal of stemming money laundering, this law is not just bad policy, it is unconstitutional. Failure of a small business to comply, intentional or not, could result in up to $10,000 in fines and up to two years in prison."
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It added that the information is already being collected and would simply require collaboration between FinCEN and the Internal Revenue Service (IRS). The group firmly believes that the said act is a perfect example of "someone who should be doing the work, shirking their responsibility, and dumping the problem at the feet of small businesses."
The court also issued an injunction preventing federal government entities from enforcing the act on the parties involved in the case, meaning the approximately 65,000 members of the NSBA across the United States. However, the opinion noted that the NSBA had "associational standing: to sue on behalf of its members. FinCEN has been reportedly suggesting that businesses affected by the act seek competent legal advice before choosing to ignore the original regulations. Furthermore, it is expected that the government will appeal this decision. (Related: The White House goes rogue: Secret surveillance program breaks all the laws.)
NSBA is a nonpartisan organization established in 1937. The organization claims decades of small-business advocacy expertise, from long-serving leadership to a knowledgeable and well-connected government affairs team.
CTA was a poor policy with a hidden bureaucratic overreach agenda
In a press release dated March 4, NSBA President and CEO Todd McCracken lauded the decision, saying that from the very beginning, CTA has been a poor policy that unfairly targets America’s small businesses.
"This ruling justifies the concerns of millions of American businesses about how the CTA is not only a bureaucratic overreach, but a Constitutional infringement," he added.
The challenge to the CTA began in 2022 when the NSBA and Huntsville business owner Isaac Winkles first brought their case before the District Court. While the case was being considered in court, the Treasury Department's implementation of the CTA has fallen short of expectations and millions of small-business owners still do not know about the requirements of the CTA. "The database is ripe for data security issues and confusion which could saddle small-business owners with hefty penalties or even jail time," the statement included.
Winkles and John Neiman, counsel for the NSBA, said that the ultimate goals of the CTA countering money laundering and terrorism financing are laudable. "But as the court also noted, the Constitution sets limits on what Congress can do to achieve even the most laudable of goals, and Congress violated those limits here. Congress can find a way to achieve these goals without exceeding the limits on its powers under the Constitution," they added.
McCracken further highlighted that the judge's decision is an opportunity for Congress to go back to the drawing board and find a solution that will truly protect Americans from "bad actors" because CTA simply will not accomplish the goal of stemming money laundering. "What it does is overstep the bounds of privacy, the law, and common sense at the expense of America's small businesses," he concluded.
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