US Representative Lisa McClain (R-MI) announced that she and 43 other Representatives sent a letter to Treasury Secretary Janet Yellen, on 5 November 2024, regarding beneficial ownership information, requesting a postponement in the implementation of the beneficial ownership information reporting requirements introduced by the Corporate Transparency Act (CTA).
The CTA, which passed the House in 2021, includes complex obligations that businesses must report significant occupational data and sensitive personal information. Without delay, the reporting deadline which runs afoul of Congressional intent will subject millions of small businesses to penalties, fines, and even jail time.
“While CTA intends to target shell corporations engaged in illicit transactions, its language actually targets all legal entities with less than USD 5 million in annual revenues and less than 20 employees – in other words, every small business in the United States,” the Members of Congress wrote. “Failure to comply can result in fines of over USD 590 per day, as well as felony charges and up to two years imprisonment. [The Treasury Department’s Financial Crimes Enforcement Network] FinCEN reported estimates that more than 32 million such entities will be affected by the new law just this year, with an additional 6 million each subsequent year as new businesses are formed.”
“In the meantime, a paperwork violation that includes large fines and jailtime is devasting to America’s small business owners simply trying to make ends meet. We ask that you delay CTA’s implementation date to comply with the intent of the law and allow the legalities, distribution of information and complicated reporting requirements to be clarified,” the Members of Congress continued.
Although filing under the CTA began at the start of this year, FinCEN reports it has received just 10% of required submissions. This compliance rate can be attributed directly to the general lack of awareness among the small business community when it comes to the new rules. Given this massive education gap, it is clear additional time is needed for regulators and other stakeholders to continue their outreach to affected small businesses.
A delay in the year-end filing deadline is also in line with congressional intent.
Effective 1 January 2024, lawmakers explicitly called for a reporting deadline of “not later than two years after the effective date of the regulations” for existing entities. This timeframe was designed to give affected entities sufficient time to learn of, understand and comply with the new reporting regime. FinCEN instead promulgated a one-year deadline of 1 January, 2025 – an unrealistically short window with which to educate America’s small business community.”