Amicus Brief: National Small Business United v. U.S. Dept. of the Treasury

The National Small Business Association and one of its individual members obtained a district court ruling declaring the Corporate Transparency Act unconstitutional because it exceeds Congress’s powers. The government has appealed to the Eleventh Circuit.

With exceptions for larger businesses and certain regulated businesses/industries, the CTA requires “reporting companies” to disclose personal information about their “beneficial owners” and “applicants” to the Treasury Department’s Financial Crimes Enforcement Network, for inclusion in a database, used for criminal law-enforcement purposes, that can be shared with other domestic and foreign governments. The personal information includes full legal names, dates of birth, addresses, and “unique identifying number from an acceptable identification document,” which by regulation means an image of their photo IDs. The CTA makes the willful failure to provide the required disclosures a crime punishable by fine or imprisonment. Congress justified the CTA with the claimed need to combat the use of American shell companies for money laundering and terrorism financing, even though bad actors are unlikely to comply in any event, and the burdens of compliance will largely fall on wholly innocent small businesses, or on individuals who use entities for personal estate-planning or property-holding purposes.

MI joined Advancing American Freedom and 12 other organizations and individuals on a brief arguing that the district court was correct when it found the CTA unconstitutional under existing Supreme Court precedent, but that precedent is itself far too deferential to federal power. The Commerce and Necessary and Proper Clauses, like the rest of the Constitution, are designed to grant specific and limited powers to Congress. The CTA cannot be justified under them.

Ilya Shapiro is a senior fellow and director of Constitutional Studies at the Manhattan Institute. Follow him on Twitter here.

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