Eleventh Circuit Upholds Corporate Transparency Act: What Businesses Need to Know

The Eleventh Circuit Court of Appeals recently issued a major decision in National Small Business United v. Yellen, a case that tested the constitutionality of the Corporate Transparency Act (CTA). The case is important not because it requires business owners to do anything now.  But rather because it holds open the possibility that they may need to act in the future.

What Is the Corporate Transparency Act?

Business owners will remember scrambling to comply with the CTA during 2024, as its first deadline approached. Passed as part of the Anti-Money Laundering Act of 2020, the CTA required most corporations and limited liability companies (LLCs) to report information about their “beneficial owners”—the real people who ultimately control or profit from the entity—to the Department of the Treasury. Congress enacted the law to combat financial crimes like money laundering and terrorism financing, which often exploit the anonymity of corporate structures.

The CTA was enjoined and then restored several times in late 2024 as a series of court challenges issued injunctions that were later overturned by the appellate courts. The on-again, off-again process led the government to extend the initial filing deadline (January 1, 2025) to March 1, 2025.

After the 2024 Presidential election, however, the new administration issued an “Interim Final Rule” that effectively exempted all U.S. entities from having to file under the CTA. Only entities formed outside the U.S. would be required to file under this administrative fiat.

The Legal Challenge

The release of the Interim Final Rule, however, did not stay litigation that had commenced in 2024, seeking to overturn the CTA on constitutional grounds.

In National Small Business United v. Yellen, the plaintiffs, a business association and Isaac Winkles (a small business owner), argued that the CTA was unconstitutional. Their main claims were:

1. Congress exceeded its powers under the Commerce Clause by imposing these reporting requirements.
2. The CTA violates the Fourth Amendment by mandating what they called “suspicionless searches” of private business information.

A federal district court in Alabama agreed with the plaintiffs, finding that the CTA did not sufficiently regulate economic activity and lacked a clear connection to interstate commerce. The government appealed, and the Eleventh Circuit took up the case which was briefed by the parties during the pendency of the initial filing deadline but only ruled upon in December 2025.

The Eleventh Circuit’s Reasoning

Commerce Clause Analysis

The Commerce Clause gives Congress the authority to regulate interstate commerce. The Eleventh Circuit’s analysis focused on the district court’s ruling that the CTA was unconstitutional because it was triggered by the formation of a corporation or LLC, which it argued was not an economic activity.

The Eleventh Circuit disagreed with the district court. It held that the formation of a corporation or LLC is an inherently commercial activity. The Eleventh Circuit noted that the plaintiffs had been unable to identify a corporation or LLC that was created for any purpose other than a commercial purpose. By requiring corporations and LLCs to disclose ownership information, the Eleventh Circuit concluded, Congress was acting within the scope of the Commerce Clause by adopting the CTA.

The Eleventh Circuit found that Congress had ample reason to believe that anonymous corporate dealings have a substantial impact on interstate commerce. The court cited congressional findings that millions of corporations are formed each year, many in states that do not require ownership disclosure. The Congressional findings adopted as part of the CTA claimed that this anonymity had been used to facilitate financial crimes affecting interstate and international commerce.

Fourth Amendment Concerns

A second argument put forth by the plaintiffs was that the CTA violated the Fourth Amendment by unreasonably requiring individual business owners to submit their personal information to the government through the CTA beneficial ownership reports.

The Eleventh Circuit rejected this line of reasoning.

The Eleventh Circuit compared the CTA to other federal laws requiring businesses to report certain information, such as banking regulations upheld by the Supreme Court. The CTA’s requirements are uniform and limited to basic identifying information regarding reporting companies and their beneficial owners.

The court considered that the CTA include data privacy safeguards. Data collected through the CTA was to have been maintained in a central database protected by the U.S. Treasury. Access was limited to federal regulators and law enforcement with protections against mis-use.

When compared to other federal laws requiring business data reporting, the Eleventh Circuit ruled that the CTA’s data collection was not an unreasonable search or seizure.

What Happens Next?

The Eleventh Circuit reversed the district court’s decision and sent the case back for further proceedings. For now, the CTA stands as constitutional. Although all domestic U.S. corporations, LLCs and other reporting companies are exempt under the Interim Final Rule, foreign entities registered to do business in the U.S. will need to continue to file their beneficial ownership reports.

Why Does This Matter?

In the short run, the Eleventh Circuit’s decision does not really change how businesses view the CTA. The Interim Final Rule remains in effect, so domestic corporations, LLCs, and other reporting companies do not need to file. Only foreign entities that are registered to do business in the U.S. must file and file amendments to maintain the accuracy of their beneficial ownership disclosures.

But the Eleventh Circuit’s decision could become important just a few years.

The Interim Final Rule was adopted by the Treasury Department, in consultation with some other federal agencies are required by the CTA, as an administrative rule. It could be reversed by the Treasury Department at any time.

When the Interim Final Rule was announced, Treasury Secretary Scott Bessent stated, “Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy.” 

While the regulatory rollback relieved business owners of their filing obligations, there was bipartisan concern. In a letter addressed to the Treasury Secretary, Senators Sheldon Whitehouse (D) and Charles Grassley (R) wrote that the Interim Final Rule “not only contravenes Congress’s intent as reflected in the CTA’s plaint text and legislative history, but it also undermines the operation of a law Congress deemed essential to protecting Americans’ national security and public safety.”

While it is unlikely that the current Treasury Secretary will reverse course, there would be no legal impediment to a future administration’s action to repeal the Interim Final Rule and re-instate the CTA regulations as they were prior to its adoption. Doing so would require more than 33 million U.S. corporations, LLCs and reporting companies to complete the effort they started in 2024 by filing beneficial ownership reports. The Eleventh Circuit’s decision to upholding the constitutionality of the CTA leaves open its possible re-implementation by the next Presidential administration.

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