A federal appellate court has upheld that the Corporate Transparency Act (CTA), the statute that requires the filing of beneficial ownership information (BOI) reports, is constitutional, overturning a decision from the lower court and remanding the case for further proceedings.

In a ruling delivered on Dec. 16, the Eleventh Circuit upheld that Congress did not overreach its authority exercised through the Commerce Clause in passing the CTA to combat money laundering and other illicit financial activities.

According to Journal of Accountancy, the Court determined that the statute governs economically significant activity accompanying corporate ownership and the operation, and Congress could conclude that such activity has a substantial interactive effect on national commerce.

“In short, the CTA is a constitutional exercise of Congress’s enumerated power to regulate interstate commerce,” the court stated. The court also found that there was no Fourth Amendment constitutional issue in regard to mandatory reporting, finding that it is “a uniform reporting requirement applied to all businesses that meet the CTA’s definition of a ‘reporting company.’” 

The suit was brought by the National Small Business Association on behalf of approximately 65,000 of its member businesses.

Although an interim rule was published by the Treasury this year eliminating the BOI filing requirements for US businesses, this did not alter the argument made by the Justice Department regarding the constitutional aspects of the law. 

The response to the ruling was not uniform, however. “Obviously, we are very disappointed by this ruling and its impact on small businesses,” stated National Small Business Association President and CEO characterized the ruling as confirming “what Congress understood and intended when it originally passed this legislation.”