“Unreasonable search in violation of the Fourth Amendment.“
On Monday, the Western District Court of Michigan properly declared the misnamed Corporate Transparency Act unconstitutional. The case was brought by the Small Business Association of Michigan.
The CTA would create an enormous federal database filled with 30 million driver license image scans of American small business owners and their spouses, and give IRS agents full on-demand access to these files.
Federal regulators, law enforcement agencies, intelligence agencies, state and local and tribal law enforcement, and even overseas foreign governments would have some degree of access to personal data and files of America’s hard working farmers and small business men and women.
Excerpts below, from the decision of federal Judge Robert Jonker:
Excerpt 1:
“There is no reasonable need for the government to vacuum up massive amounts of data from the smallest players in the system and store all of it in an Orwellian ‘Big Brother’ digital warehouse for later use by any law enforcement agency that asks.”
Excerpt 2:
“The CTA’s reporting requirements reach indiscriminately across the smallest players in the economy to extract and archive a trove of personal data explicitly for future law enforcement purposes at an expected cost to the reporting players of almost $22 billion in the first year alone. The Fourth Amendment prohibits such an unreasonable search.”
Excerpt 3:
“The compelled production of corporate papers, or compilations of information in those papers, at pain of civil or criminal penalties, is tantamount to a physical intrusion on Plaintiffs’ private commercial property”
Excerpt 4:
“In the Court’s view, this massive collection of personally identifying data for law enforcement, costing providers billions of dollars, amounts to an unreasonable search in violation of the Fourth Amendment.“
Excerpt 5:
“The central FinCEN database is supposed to be secure and non-public, though it is now common knowledge that both government and private data collections are regularly hacked or reviewed by unauthorized persons.”
Excerpt 6:
“The CTA, in other words, places in the hands of government officials and special government employees large volumes of personally identifiable information and commercially sensitive data.”
Excerpt 7:
“The page cautions readers to ‘[n]ever give personal information, including regarding beneficial ownership to anyone unless you trust the other party.’ Id. Implicit in this warning, in the scams themselves, and in the Act’s statutory safeguards against information sharing, is a recognition that the CTA’s compelled information is sensitive and private. The government itself, then, acknowledges the privacy interest of citizens in this data. And here the information required is not simply about the commercial entity but about each entity’s beneficial owners, who are people after all. The personal identity required is not of an entity or robot; it is of a flesh-and-blood human being.”
Excerpt 8:
“In other words, the exempt businesses are the biggest players in the economy, and the target businesses are the small and entrepreneurial companies like those bringing this action.”
Excerpt 9:
“It bears emphasis that the CTA is a stick, not a carrot. It carries the threat of a felony conviction and steep civil and criminal penalties for noncompliance. 31 C.F.R. § 5336(h)(1)–(2). This, combined with the natural reticence to disclose private information to the government, risks chilling core associational freedoms, including ownership in a private company.”
Excerpt 10:
“The Constitution generally, and the Bill of Rights in particular, are all about protecting citizens from the power of government. Governmental power has a natural tendency to expand and encroach on the freedom and privacy of citizens. That is true even when the government is pursuing goals—like crime investigation and prevention—that are worthy and important. The Fourth Amendment is one of the key limits on government power that protects the legitimate privacy interests of citizens from unreasonable government intrusion. In Orwell’s 1984, ‘Big Brother’ had omnipresent telescreens everywhere—including every citizen’s living room—that made sure nothing beyond a smuggled, hand-written diary was truly private. The CTA doesn’t go that far, to be sure, but it’s a step in that direction. It compels citizens to disclose private information they are not required to disclose anywhere else just so the government can sit on a massive database to satisfy future law enforcement requests. It does so at a cost of billions of dollars to the citizens least likely to afford it. It amounts to an unreasonable search prohibited by the Fourth Amendment.”
The Western District Court of Michigan is not the first to rule the Corporate Transparency Act unconstitutional. In March of 2024 the Northern District Court of Alabama declared the CTA unconstitutional as it exceeds past Congress’ enumerated powers.
The Corporate Transparency Act is an invasion and violation of Americans’ rights that threatens small businesses across the nation.
President Trump and Treasury Secretary Scott Bessent are working to combat this unconstitutional Act and provide relief for American small businesses.
Americans for Tax Reform urges full repeal of the CTA via the Repealing Big Brother Overreach Act sponsored by Sen. Tommy Tuberville (R-Ala.) and Rep. Warren Davidson (R-Ohio).