Beneficial Ownership Reports Deemed Unreasonable Search by Judge

A band of Michigan business owners, nonprofits, and limited liability companies demonstrated that the Corporate Transparency Act violated their Fourth Amendment rights against unreasonable search, a Michigan federal judge ruled.

Judge Robert J. Jonker of the US District Court for the Western District of Michigan granted summary judgment to the challengers Monday, just one day after the US Treasury Department announced that it would end CTA enforcement against US citizens and domestic businesses. The court’s order follows that of at least three other district courts—one in Alabama and two in Texas—which deemed the law likely unconstitutional.

The Small Business Association of Michigan’s case hasn’t been made moot by the Treasury’s announcement, which wasn’t a matter of record, Jonker’s opinion said.

“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,” Jonker said.

Jonker compared the law’s data collection as comparable to “Big Brother,” a symbol of government overreach in George Orwell’s 1949 dystopian novel “1984.”

The law is an anti-money laundering measure that requires businesses to file reports to Treasury’s Financial Crimes Enforcement Network, disclosing the identities of individuals who own or control the company.

Proponents call it a vital tool for combating illicit financial schemes, like drug trafficking and tax evasion, which use anonymous shell companies. But businesses were quick to sue, calling it a unconstitutional overreach.

“The CTA may have good intentions but the road it chooses to pursue them paves over all reasonable limits,” Jonker said.

Miller, Johnson, Snell & Cummiskey PLC represents the Small Business Association of Michigan.

The case is Small Bus. Ass’n of Mich. v. Yellen, W.D. Mich., No. 1:24-cv-00314, 3/3/25.