In this issue of BoxScore, we present “Everything You’ve Always Wanted to Know About the Corporate Transparency Act (CTA).” What’s this? You haven’t heard about the CTA and the reporting requirements it will impose beginning January 1? If not, you’re in good company. But AICC, through its network of allied small-business organizations in Washington, D.C., can now bring you up to speed on what to expect.
We start our primer by going to the source of all things legal—lawyers. In a recent article in the ABA Journal, the American Bar Association says, “At its core, the CTA is a mechanism to deal with issues related to ‘dirty money’—i.e., guarding against money laundering, terrorism financing, and other forms of illegal financing—as well as the general lack of beneficial owner (i.e., ‘true owner’) information with respect to many domestic entity structures. … The CTA was born of the view that the availability of beneficial ownership information is a crucial tool in the fight against tax evasion, money laundering, corruption, terrorist financing, and other financial crimes.”
The “high crimes and misdemeanors” against which the CTA is targeted are hardly the stuff of our businesses’ day-to-day accounting challenges. (Just ask your accounts receivable manager.) Yet, it is precisely the small-business community that will bear the brunt of what the CTA and its enforcement arm, the Financial Crimes Enforcement Network (FinCEN), will require. Says Brian Reardon, CEO of the S Corporation Association, “Starting next year, millions of small-business owners will get a letter from a federal agency they never heard of telling them they need to comply with a law nobody’s told them about. Most, like reasonable people, will probably think the notice is a scam and throw it away.”
The letter we’ll receive will tell us that starting January 1, 2024, all newly formed corporations, LLCs, and other covered entities must report the personal information of their “beneficial owners” to FinCEN. On January 1, 2025, all covered entities with less than $5 million in revenue and 20 employees will have to do the same. The information to be provided for beneficial owners includes name, address, Social Security number, and photos. Noncompliance can result in fines of up to $500 a day or two years’ imprisonment.
Now you know about the CTA. There is a bright side to this dark story, however. The National Small Business Association has filed a lawsuit against it, NSBA v. Yellen, which argues that the CTA is unconstitutional. Given recent landmark decisions by the U.S. Supreme Court and its subsidiaries, we can hope that reasoned judges will see this law for what it is: an unconstitutional invasion of privacy.
Let your U.S. representatives and U.S. senators know how you feel about this law and its potential effects on your business. Go to www.house.gov or www.senate.gov to find your congressional representatives. Or call the U.S. Capitol switchboard at 202-224-3121.
Eric Elgin is owner of Oklahoma Interpak and chairman of AICC’s Government Affairs subcommittee. He can be reached at 918-687-1681 or firstname.lastname@example.org.