THE CORPORATE TRANSPARENCY ACT MEANS JAIL TIME FOR SMALL BUSINESS OWNERS | OPINION
The Corporate Transparency Act (CTA) is a classic example of intrusive big-government overreach. It places a new compliance burden on main street Americans with an LLC, and failure to comply comes with criminal penalties that could land you behind bars.
The CTA requires individuals with "substantial control" over a company or an equity position of 25 percent or greater to disclose personal data with the Treasury Department's Financial Crimes Enforcement Network (FinCEN) – a government bureau most Americans have never heard of before.
The CTA will impact small businesses across the nation in addition to millions of citizens who use LLCs to invest in real estate or to protect their assets. Over 32 million business entities are estimated to be affected by the law.
Americans with a CTA filing obligation must report their name, date of birth, address, and a scan of their government-issued photo ID to the Treasury Department. Any time this information changes, updated information must be submitted to FinCEN's database within thirty days.
Failure to file with FinCEN could lead to a criminal penalty of up to two years of jail time and civil fines of up to $10,000 per violation.
Why does the federal government need this information in the first place? The goal of the CTA was to crack down on shell companies used to commit crimes. The reality is lawbreakers are not going to file with FinCEN. Instead, the law will place a massive administrative burden on millions of hard working American business owners.
The legislation was championed by Oregon Senator Ron Wyden and former Representative Carolyn Maloney of New York and slipped into the Fiscal Year 2021 National Defense Authorization Act. After a veto by then President Trump and a subsequent congressional override vote, the bill became law on January 1, 2021, and it went into effect this year.
Few in Washington and most outside the D.C. beltway have no idea this law exits – much less the heavy criminal penalties associated with noncompliance.
FinCEN's filing portal opened on January 1. All beneficial owners of existing business entities must file by January 1, 2025. For entities created on or after January 1 of this year, beneficial owners have 90 days to file.
Unsurprisingly, large businesses with powerful lobbyists got a carveout in the law and do not have to comply with the CTA. While the little guy has to struggle with all this red tape, LLCs with more than 20 employees and greater than $5 million in revenue do not have to file with FinCEN—another win for the special interest groups over We the People.
The slim percentage of small business owners who are aware of the CTA's existence are looking for compliance guidance but have few places to turn. Accounting and law firms do not want to take on the responsibility of filing for clients, and many industry professionals are unaware of the repercussions associated with failure to file.
The criminal penalties imposed by the law open the door for abuse by the IRS and politically motivated prosecutors with an axe to grind.
The IRS has a history of singling out certain taxpayers for scrutiny based on their religious and political beliefs. Remember Lois Lerner? In an America where justice is becoming less equal by the day and prosecutions have been used to target political opponents, the CTA places yet another arrow in the quiver of bad actors at the IRS and in our justice system.
To add insult to injury, FinCEN has done little to nothing to educate Americans on the CTA and the harsh consequences of noncompliance.
I am introducing the Repealing Big Brother Overreach Act to overturn the CTA in its entirety. My bill would provide millions of small businesses and entrepreneurial Americans with regulatory and compliance relief and remove a weapon for political persecution from rouge prosecutors and the IRS. I am proud to be joined in this effort by Congressman Warren Davidson of Ohio, who is filing a companion bill in the U.S. House of Representatives.
If Congress fails to act on this legislation, millions of American small business owners could be in for a rude awakening next year.
Mr. Tuberville, a Republican, is a U.S. senator from Alabama.
The views expressed in this article are the writer's own.
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