The Treasury Department by Joe Campbell licensed under CC BY-SA 2.0

New Appeal Challenging Federal Surveillance Law in the Ninth Circuit

Firestone v. Yellen

A coalition of small businesses from around Oregon is challenging the Corporate Transparency Act (CTA), a federal law that requires 32 million small businesses to report confidential information to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The deadline to comply with the CTA is December 31, 2024. Failure to submit a report, errors, or omissions can result in uncapped and unlimited daily civil penalties of up to $500 per day, and criminal sanctions of up to $10,000 in fines and up to two years’ imprisonment, or both.

The reports must identify and provide personal information about each entity’s “beneficial owners.” Beneficial owners are vaguely defined but include any person who exercises sufficient direct or indirect, formal or informal control of the entity. Although it was enacted to combat financial crime, the law exempts large corporate entities and financial firms, leaving mostly small businesses and some non-profit organizations to comply.

Seven individual Plaintiffs in Oregon filed a lawsuit challenging the CTA on the grounds that Congress has no authority under the Constitution to compel businesses to disclose private information to federal law enforcement. The law’s reporting mandate also violates the First Amendment’s protection for free association and the Fourth Amendment right to freedom from warrantless searches.

On November 22, 2024, the plaintiffs filed an emergency application with the Ninth Circuit to stop the CTA from taking effect until after litigation is complete. In light of the looming December 31 deadline, a preliminary injunction is necessary to protect the litigants from civil or criminal liability for noncompliance while litigation is pending.

CIR is partnering with Kell, Alterman & Runstein, L.L.P., a Portland, Oregon law firm that represented the plaintiffs in the district court.