A new federal government financial reporting requirement takes effect nationally in a few weeks and it’s prompted Oklahoma U.S. Sen. James Lankford and others to ask Treasury Secretary Janet Yellen to delay the implementation.
Small business groups complained about the Financial Crimes Enforcement Network rules that will force them to collect and store confidential personal information about small businesses that have fewer than 20 full-time employees.
This substantial regulation that impacts nearly every small business in America is expected to take effect January 1st and impact 32.6 million small businesses who are largely unaware of the new requirements that carry significant criminal and civil penalties for non-compliance, according to an announcement by Sen. Lankford.
He and Sens. Rick Scott of Florida and Mike Rounds of South Dakota were joined by House Financial Services Chairman Patrick McHenry of North Carolina and Representative Warren Davidson Ohio to lead 75 of their colleagues in sending a bicameral letter to Treasury Secretary Janet Yellen and Andrea Gacki, Director of the Financial Crimes Enforcement Network (FinCEN), to request the delay.
“According to FinCEN estimates, more than 32 million separate reports are expected to be filed in 2024, with an additional five to six million filings each year thereafter,” wrote the members of Congress.
“Unfortunately, FinCEN is woefully behind in educating small business owners and stakeholders of their new obligations under the CTA that begin in just a few short weeks.”
They referred to a National Federation of Independent Business survey that found 90% of the respondents were entirely unfamiliar with the reporting requirements.
“Even more concerning is that the CTA has civil and criminal penalties of up to $10,000 and two years of jail time for failure to comply,” complained Lankford and his colleagues.
Read the full letter below.
Dear Secretary Yellen and Director Gacki:
On behalf of the millions of small businesses in our states, we write to you today with significant concerns regarding the implementation of the beneficial ownership reporting requirements under the Corporate Transparency Act (CTA). The CTA requires most corporations, limited liability companies, and other entities created in or registered to do business in the United States to regularly report information about their beneficial owners—the persons who ultimately own or control the company, to the Financial Crimes Enforcement Network (FinCEN) beginning on January 1, 2024.
While the goal of this new law is to target shell companies involved in illicit financial transactions, the CTA defines covered entities as those having 20 or fewer employees and under $5 million in revenue. In other words, not just shell companies, but nearly every small business in America.
Effective January 1st, small businesses will be required to provide the personal information of their beneficial owners – owners, board members, senior management, legal representation – and continue to monitor and report this information to FinCEN to ensure that it is current and up-to-date or they will face civil and criminal penalties. According to FinCEN estimates, more than 32 million separate reports are expected to be filed in 2024, with an additional five to six million filings each year thereafter.
Unfortunately, FinCEN is woefully behind in educating small business owners and stakeholders of their new obligations under the CTA that begin in just a few short weeks. In fact, a National Federation of Independent Business (NFIB) survey found that 90 percent of respondents were entirely unfamiliar with these reporting requirements. Even more concerning is that the CTA has civil and criminal penalties of up to $10,000 and two years of jail time for failure to comply.
This lack of awareness and education is alarming and must be addressed before the law is implemented. Dozens of organizations, representing millions of small businesses operating in every state and community across the country, have already publicly expressed their strong support for delaying implementation of the beneficial ownership information (BOI) reporting requirements by one year.
Further, FinCEN has yet to finalize the two final BOI rulemakings that are critical to protecting small businesses’ personal information. These include the “Access Rule,” and the “Customer Due Diligence Rule”. As you know, the Access Rule specifies the parameters around which the database can be accessed, the purposes for which the information can be used, and how the highly sensitive information will be protected. The Customer Due Diligence Rule is critical to make sure BOI would not result in a duplicative reporting regime for small businesses.
Therefore, we strongly request that FinCEN delay the January 1, 2024, effective date for all BOI requirements by a minimum of one year and FinCEN has finalized all outstanding rulemakings. We believe a year’s delay will provide FinCEN and the business community with more time to educate owners of their new obligations. It will also give FinCEN time to review the new rules and improve and finalize the statute’s regulatory framework.
Thank you for your prompt attention to this important matter.
Sincerely,
