By Nicholas Fisher
I spent the last 15 years representing small businesses in the Pacific Northwest before coming home to Chadron to teach at Chadron State College. I miss the Puget Sound, I miss the rivers, and I really miss the fishing. During New Year’s, I was reading news about trawling in Alaska and horrible bycatch numbers of endangered fish that I get limited opportunities to catch, but I was more appalled by a letter I read.
A good friend’s dad received a letter in the mail from his accountant telling him that he needed to comply with the Corporate Transparency Act. The letter was headed for the round filing cabinet when my friend intercepted it and said maybe we should do some more research. I happened to be that “more research.”
You may have been lucky enough to have seen some news articles about the Corporate Transparency Act, but if you have not, let me introduce to you a piece of legislation that slipped past many accountants and attorneys as we were all fixated on the results of the 2020 election and January 6th.
In an 11th hour funding bill, The National Defense Authorization Act for Fiscal Year 2021 under HR 6395, one of the most divided, do-nothing Congresses passed legislation on December 11, 2020. Then President Trump vetoed the bill on December 23rd, only to have Congress override the veto on January 1, 2021. You are surprised as much as I am about Congress working on New Year’s, and coming together enough for a 2/3 override. It is shocking. Inside the NDAA was hidden the Anti-Money Laundering Act of 2020 and then inside of that was included the Corporate Transparency Act. The CTA has been defeated as legislation since its first appearance in 2008. I am sure each of our representatives and senators carefully read every word.1
From Nebraska, Senator Fischer voted for the bill while Senator Sasse did not vote. The Senate passed the bill 81-13 with 6 not voting.2 Representative Bacon voted for the bill, Fortenberry did not vote, and Smith voted no. The bill passed the house 322-87 with 21 not voting.3
This context is maybe not as important as the meat of the bill, which for simplicity sake requires almost all small businesses, with less than 20 employees, to file information about the beneficial owners of the company by the end of the year. Failure to make the reporting to the Financial Crimes Enforcement Network (FinCEN) will result in a penalty of $500 per day up to a maximum fine of $10,000.4
In my work with small business for the last 20 years, it is clear to me that a penalty of $10,000 would force closure of the majority of those entities. Especially when we look at what entities are covered. The reporting companies are any corporation or limited liability company. So, this does not just include the small corporations that line Main Street, but the LLC that owns a rental property or two. The beneficial owners are those that are entitled to 25% or more of the business.
The information being collected is not extensive. The reporting company must provide its Legal Name, Trade Names, business address, jurisdiction, and its tax identification number. From each beneficial owner, FinCEN will collect full legal name, date of birth, street address, a unique identification document like a passport or nonexpired driver’s license, and an image of that document.5
This broad net being cast by FinCEN will capture an estimated 36 million small businesses. Many of the businesses have filings with their respective Secretary of State, file taxes at least yearly, and otherwise report the same information that FinCEN is collecting. The bill itself says that it is seeking to combat money laundering, tax fraud, and other illicit activities, but in reality it added regulatory hassle and paperwork that main street companies are required to comply with because our do nothing congressmen and women refuse to read through the minutia of their bills.
Make sure you take time to go to the FinCEN website and comply with this wide net, so your company does not become a $10,000 by-catch of the Federal Government.
1 https://www.congress.gov/bill/116th-congress/house-bill/6395/actions
2 https://www.senate.gov/legislative/LIS/roll_call_votes/vote1162/vote_116_2_00292.htm
3 https://clerk.house.gov/Votes/2020253
4 https://www.americanbar.org/groups/business_law/resources/business-law-today/2021-february/the-corporate-transparency-act/
5 https://agilelegal.com/all-you-need-to-know-about-corporate-transparency-act-compliance/?utm_source=Search-Campaign&utm_medium=CTA-Website-Traffic-Agile&utm_campaign=CTA&utm_id=2023-12&gclid=Cj0KCQiAkeSsBhDUARIsAK3tieevz8KJaaprSTQ-oAKoHLFS1c_DAmpb7gij1Q23-xoXGMWqvkm8fGgaAriDEALw_wcB