PPSA Tells Eleventh Circuit: Treasury’s Small Businesses Database “Simply Incompatible” with Founding Era Ideals and Fourth Amendment

The surveillance state is hitting small businesses hard lately. If the “Make Everyone a Spy” provision weren’t enough, the Corporate Transparency Act (CTA) imposes sweeping disclosure requirements on “beneficial owners” of small businesses, with harsh punishments for mistakes on an official form.
 
After the National Small Business Association sued the Treasury Department, a federal court declared the CTA unconstitutional. It issued a scholarly opinion that explored the nuances of Congress’s power to regulate interstate commerce. Treasury appealed to the Eleventh Circuit. In our amicus brief, PPSA tells the Eleventh Circuit that the lower court got it right, but that there’s an easier way to resolve this case. We inform the court that the Fourth Amendment provides the “straightforward and resounding answer” that the CTA is unconstitutional.
 
PPSA warns that the CTA’s database provisions pose an unprecedented threat to Americans’ privacy that are “even more disturbing” than the new rule’s disclosure requirements. We explain that the information collected from tens of millions of beneficial owners will be stored in what the government calls an “accurate, complete, and highly useful database” that can be searched by multiple federal agencies, no warrant required.
 
And while the government claims this data will be used to catch tax cheats, the CTA says it will be used in conjunction with state and tribal authorities, who have no power to enforce federal tax laws. Creating such a database for warrantless inspection by the FBI, IRS, DEA, and Department of Homeland Security is obviously ripe for abuse.
 
Our brief explains how this database could be used to identify owners of businesses with an ideological character – like political booksellers – and single out their investors for retaliation. This is not a far-fetched hypothetical. Many agencies, including the Treasury Department, have engaged in politically motivated financial investigations, documented in detail by the House Judiciary Committee.
 
Our brief notes that the database will be so sophisticated that it should be evaluated under a U.S. Supreme Court precedent addressing high-tech surveillance, just as the Fourth Circuit did for Baltimore’s database-driven aerial surveillance program. And that precedent explains that surveillance tools can’t be used to undermine the sort of privacy that existed when the Fourth Amendment was adopted. We told the court:
 
“This database thus has the sort of ‘depth, breadth, and comprehensive reach,’ that is simply incompatible with ‘preservation of that degree of privacy against government that existed when the Fourth Amendment was adopted.’”
 
As pernicious as the database itself is, recent advances in technology make it even worse. With modern machine learning, seemingly innocuous personal details can be linked up in disturbing ways. For instance, researchers have known how to identify authors based on a collection of anonymous posts since 2022. PPSA points out that the government could identify authors with views it dislikes, see if they pop up in the beneficial owner database, and have multiple agencies launch pretextual investigations.
 
Next, we address how advancing AI technology could make such surveillance even more potent, then urged the court not to “leave the public at the mercy of advancing technology,” but to preserve Founding-era levels of privacy despite the march of technology. Readers might notice a pattern of AI exacerbating existing privacy invasions, from mass facial recognition to drone surveillance to a proliferating body of databases.
 
So far, the government has relied on the “special needs” exception. This rule allows the government to keep its own house in order, with the warrantless drug testing of schoolteachers and top-secret national security employees. But this authority is often abused, as we’ve noted previously. Our brief explains that this exception doesn’t even apply to information collected to identify crimes – which is exactly what the government claims the CTA is supposed to help with.
 
But the struggle for constitutional rights and privacy remains multilayered. If the CTA remains struck down, the government will still be purchasing vast amounts of Americans’ personal information from shady “data brokers.” That’s why we applauded the House recently for passing the Fourth Amendment Is Not For Sale Act, and urge the Senate to do so as well. Now it is up to the Eleventh Circuit to protect the American people from an overbearing government, hungry to track our every move.