Small business reporting requirement found unconstitutional by Alabama federal judge

WASHINGTON (AP) — In a blow to the Biden administration’s effort to increase corporate transparency, an Alabama federal district judge has ruled that the Treasury Department cannot require small business owners to report details on their owners and others who benefit from the business.

U.S. District Judge Liles C. Burke decided late Friday that the Corporate Transparency Act, a landmark U.S. anti-money laundering law enacted as part of the National Defense Authorization Act for fiscal year 2021, is unconstitutional on the grounds that Congress exceeded its powers in enacting the law — and so the rulemaking stemming from it is unlawful.

The National Small Business Association filed suit in November 2022 to block the requirement that tens of millions of small businesses register with the government as part of an effort to prevent the criminal abuse of anonymous shell companies.

The small business lobbying group argued that the reporting rule violates the Constitution, saying it is unduly burdensome on small firms, violates privacy and free-speech protections and infringes on states’ powers to govern businesses.

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