Unless Congress acts quickly, America’s small business owners, preparing for Christmas, may soon be visited by the compliance Grinch carrying fines and possible jail time down the chimney.
New beneficial ownership information reporting requirements under the Corporate Transparency Act (CTA) are set to ensnare millions of business owners across the country unknowingly. While the legislation’s stated purpose was to combat money laundering, terrorism financing and other illicit activities, the burdens it places on small businesses — particularly during the holiday season — strongly outweighs its intended benefits.
As Christmas approaches, policymakers should consider granting relief to small businesses by delaying the reporting requirements. Here is why the CTA poses significant challenges and why a reprieve is urgently needed.
First, the CTA requires small businesses to disclose detailed information about their “beneficial owners” to the Financial Crimes Enforcement Network (FinCEN). This includes anyone who owns or controls at least 25% of the business or exercises substantial control over it. For small businesses, already under strain during the busiest time of the year, the timing could not be worse. Entrepreneurs juggling inventory, staffing and holiday sales must now also contend with a maze of new administrative requirements.
The penalties for noncompliance under the CTA are severe: fines of up to $10,000 and imprisonment for up to two years. For small business owners scrambling to meet holiday demands, the risk of unintentional error is high. Compounding the problem, only 10 million of the 36 million covered entities had filed as of the beginning of December, suggesting that over 20 million small businesses will be out of compliance at the end of the year.
That’s right, millions of small businesses are currently in the line of fire, the majority of which likely have no idea about the requirements or consequences of noncompliance.
The Christmas season is a make-or-break time for many small businesses, and the threat of punitive penalties adds unnecessary anxiety during an already stressful period. Granting a delay in the reporting requirements would give entrepreneurs the breathing room they need to focus on what matters most: serving their customers and closing out the year successfully.
The holiday season should be a time for joy and connection — not a time for small business owners to worry about potential data breaches or the invasion of their privacy. The CTA mandates the collection of sensitive personal information, such as the names, addresses and identification numbers of beneficial owners. The law also requires submitting a picture of each beneficial owner’s license or passport. While FinCEN is tasked with safeguarding this data, the centralized database presents a potential target for cyberattacks or misuse. Delaying the CTA’s reporting deadlines would allow for better preparation and security measures, ensuring compliance without rushing into a system fraught with risk.
The CTA exempts many larger entities, such as publicly traded companies and certain nonprofit organizations, from its reporting requirements. These exemptions effectively shift the compliance burden to small businesses, which are already grappling with inflation, supply chain disruptions and seasonal pressures.
For many small businesses, the fourth quarter is the most critical time of the year, often determining whether they end the year in the black. Imposing these reporting requirements now is tone-deaf to the reality that small businesses need support, not additional hurdles, during this crucial period.
With Christmas just around the corner, policymakers have a clear opportunity to provide relief to small business owners.
While the courts have recently issued an injunction on the requirements, the decision is currently under appeal, underscoring the need for Congress to act. By delaying the CTA’s reporting requirements, Congress can ease the administrative burden on small businesses during their busiest season, provide time for better education and resources to ensure compliance, and demonstrate support for Main Street America, sending a strong message that small businesses matter. Without relief, the Corporate Transparency Act risks becoming the Grinch that steals Christmas for millions of hardworking small business owners.
Delaying the reporting requirements would not only provide much-needed relief but also demonstrate that policymakers understand the vital role small businesses play in our communities.
A temporary delay, however, is insufficient. President-elect Donald Trump should announce that his administration will permanently revoke the CTA’s onerous reporting requirements.
Meanwhile, this holiday season, let’s not allow a burdensome regulation to rob Main Street of its joy and prosperity. Instead, let’s give small businesses the gift of freedom to focus on their customers, their families and their futures. It is time for Congress and the incoming administration to save Christmas for small businesses — and ensure that the CTA does not become the Grinch who stole it.
James Carter headed President-elect Donald Trump’s tax team during the 2016-17 transition. He served as deputy assistant secretary of Treasury from 2002-06 and deputy undersecretary of Labor from 2006-07.
Palmer Schoening is chairman of the Family Business Coalition in Washington, DC
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
(Featured Image Media Credit: Screen Capture/PBS NewsHour)
All content created by the Daily Caller News Foundation, an independent and nonpartisan newswire service, is available without charge to any legitimate news publisher that can provide a large audience. All republished articles must include our logo, our reporter’s byline and their DCNF affiliation. For any questions about our guidelines or partnering with us, please contact licensing@dailycallernewsfoundation.org.
