Land of confusion

Editor’s note: The Corporate Transparency Act has been reinstated since this article was published, requiring beneficial ownership information reports by March 21. More details can be found here.

Controversy and confusion behind the Corporate Transparency Act’s beneficial ownership information reporting requirement doesn’t seem to go away – and lawmakers are trying to either put the requirement on the back burner or get rid of it completely.

In late January, the Supreme Court further muddied the waters by lifting an injunction on the Corporate Transparency Act. First ordered on Dec. 3, the injunction was lifted and then reinstated within 72 hours, just days before the original Jan. 1 deadline for most small businesses to file a beneficial ownership information report.

However, the Supreme Court order did not touch a second injunction on the Corporate Transparency Act that was issued by a judge in a similar but different case on Jan. 7. Consequently, beneficial ownership information reporting was not required as of press time in early February.

According to the Treasury Department’s Financial Crimes Enforcement Network, the agency overseeing the Corporate Transparency Act, that also means companies “are not subject to liability if they fail to file this information while the (Jan. 7) order remains in force.” FinCEN encourages small-business owners to voluntarily submit a report at FinCEN.gov/boi.

All of that could change soon. On Feb. 5, the federal government asked the district court that issued the

Jan. 7 injunction to lift it. If the injunction is lifted, small-business owners will again be required to file a beneficial ownership information report. FinCEN said the new filing deadline would be 30 days after the court’s ruling. It would also consider alleviating “the burden on low-risk entities.” As of press time, the court had yet to rule.

While small-business owners are trying to keep up with conflicting, rapid-fire court rulings, Congress may give them some temporary or permanent relief.

Resolution via legislation

In January, Sen. Tommy Tuberville, R-Ala., and Rep. Warren Davidson, R-Ohio, reintroduced the Repealing Big Brother Overreach Act. Simply put, the bill attempts to eliminate the Corporate Transparency Act, thereby putting beneficial ownership information reporting to an end for good.

“The (Corporate Transparency Act) requirements that dictate (small-business owners) must share personal data or pay a fine and spend time in jail does nothing but stifle increased economic growth,” Tuberville said in a statement. “This unprecedented intrusion into personal privacy is something you’d expect in Communist China, but not in the United States of America. I’m thankful that the Supreme Court is now deciding the legality of the (Corporate Transparency Act) requirements, but we need to ensure that our business owners never have to worry about this again.”

As of early February, the Senate bill had 25 co-sponsors, whereas the House version had attracted 89 co-sponsors. All co-sponsors for both bills are Republicans. With a razor-thin majority in both chambers, there is no guarantee either bill will make it out the door.

Last April, Davidson introduced the Repealing Big Brother Overreach Act in the House. It died in committee with 100 co-sponsors, all Republicans. Tuberville introduced a companion bill in the Senate. That bill attracted 18 Republican co-sponsors but also died in committee.

“The Financial Crimes Enforcement Network (FinCEN) infringes (on) American small business owners’ privacy rights by forcing them to disclose sensitive information to the government,” Davidson said in a statement. “The (Corporate Transparency Act) is a disaster for small businesses and must be repealed immediately.”

Congressional compromise

Although Democrats appear to have no appetite to completely undo beneficial ownership information reporting, they do seem to be more open to delaying the new rule.

About two weeks after the Repealing Big Brother Overreach Act was reintroduced, Rep. Zach Nunn, R-Iowa, introduced the Protect Small Business from Excessive Paperwork Act. If the bill is signed into law, the deadline for the Corporate Transparency Act’s beneficial ownership information reporting requirement will be extended to Jan. 1, 2026, for most small businesses.

Both sides of the aisle appear to be open to delaying reporting requirements. The Protect Small Business from Excessive Paperwork Act was co-led by three other House reps, including two Democrats: Kansas Rep. Sharice Davids and North Carolina Rep. Don Davis.

That extension applies only to businesses formed before Jan. 1, 2024. Companies formed last year had a 90-day window to file a beneficial ownership information report. The clock started once a company received notice of creation or registration. If the reporting requirements are reinstated, any small business formed after Jan. 1 of this year has 30 days to file.

But with the Corporate Transparency Act on pause, new companies do not have to file. Since the Protect Small Business from Excessive Paperwork Act applies only to older companies, even if it is signed into law, newer companies will still be required to file a report within 30 days if the injunction on the Corporate Transparency Act is lifted.

The bill is backed by the National Federation of Independent Businesses, which has reported 80% of its members have never heard of beneficial ownership information reporting. Other supporters are the National Small Business Association and U.S. Chamber of Commerce.

“America’s small-business owners have been on an unwelcome rollercoaster ride with the various lawsuits across the country, wondering when and whether they need to comply,” National Small Business Association President Todd McCracken said in a statement. “I cannot stress how important some kind of certainty is on filing these beneficial ownership information reports, and Congressman Nunn’s bill would do exactly that.” LL