Constitutionality of US Corporate Transparency Act Upheld

The Appeal
On 16 December 2025, the United State Eleventh Circuit Court of Appeals reversed the decision in  NSBU v. Yellen, which had found the Corporate Transparency Act (CTA) to be an unconstitutional exercise of congressional power. Under the 2021 law, the US Congress established a federal registry requiring most US entities to disclose information on their beneficial owners to FinCEN, the financial crimes division of the US Treasury Department. As the original disclosure deadline of 31 December 2024 loomed, multiple groups of plaintiffs challenged the law in court. The first such successful challenge originated in the District Court for the Northern District of Alabama. In NSBU v. Yellen, the District Judge granted summary judgment to the plaintiffs on the grounds that the CTA violated the jurisdictional limitations set out in the “commerce clause” of the US Constitution. The “commerce clause” generally requires that an activity must be economic in nature and intersect with interstate commerce for the federal government to regulate it lawfully. On appeal, the respondent-plaintiffs also argued that the CTA violates the Fourth Amendment right against unreasonable searches. The appellate court’s opinion demonstrated no appetite for either these claims, adopting instead the interpretation of the law and Constitution that all but a few outlier courts (e.g. Top Cop Shop v. Garland) have found convincing in the course of this multi-pronged campaign against the law.

A Bellwether Decision?
This appellate decision has characteristics of a “bellwether" case. The term colloquially refers to a judicial decision, where the perceived political leaning of the court – in this case, two of the three panelists are Trump appointees on arguably the most conservative appellate circuit in the country – scythes down a position supported by their own political class – in this case, a Republican administration that already gutted the CTA through executive action. Even in independent judicial systems, such outcomes are noteworthy. The presumption emerges that the reasoning underlying a bellwether decision – made by a court disposed in theory to favor their own side’s arguments but finding those arguments legally unsound – will therefore prevail across the legal system.

Quo Vadis, CTA?
So what does this mean for the CTA? The next step is clear; the timing for it far less so. If Congress files an objection to the administration’s narrowing of the law’s scope – fewer than 1% of those parties covered by the law as enacted remain covered by it following the Treasury Department’s administrative action – the courts will almost surely rule in the legislature’s favor. In that event, the courts will reinstate the full scope of the law so that it covers all companies and many other entities set up in US States. Hopefully, that eventual decision – whenever it may arrive, probably not for a few years yet – provides ample time for the CTA Reporting Companies to collect, review and submit their Beneficial Owner Information before the reporting deadline.