A new federal law places burdensome reporting requires on small businesses
NFIB State Director has written a column about the urgent need to repeal the Corporate Transparency Act, federal legislation that singles out small businesses for burdensome new reporting requirements.
Main Street is about to get sucker punched by a federal law that afflicts owners with paperwork and added costs and could expose their personal information to hackers and identity thieves.
If owners make a mistake and don’t follow the rules exactly, they could be charged a late fee, fined $10,000 and sent to prison.
This edict is the Corporate Transparency Act. It took effect on Jan. 1 and requires over 30 million small businesses – including tens of thousands in Indiana – to send personal information about each of their “beneficial owners” to the U.S. Treasury Department. Beneficial owners are practically anyone who controls or owns a piece of the business.
What’s worse is that most small business owners don’t know about it.
National Federation of Independent Business recently surveyed small business owners nationwide and found that 83 percent hadn’t heard about the mandate. Put simply, they’re in danger of being punished for inadvertently breaking a law they don’t know exists.
Usually, when a bad piece of legislation passes Congress, one side can easily blame the other, but this thing had strong support on both sides of the aisle because it was framed as a way to help catch bad guys.
Supporters said criminals sometimes try to hide behind small businesses. They argued that requiring small businesses to file paperwork on their owners would make it easier for officials to investigate companies suspected of helping evildoers launder money.
One problem in their argument is that crooks generally don’t follow rules.
Drug dealers and other villains already are facing decades in prison if they’re ever caught and convicted. I don’t think they’d have a problem with lying on a government form or ignoring the rule altogether.
Another problem is that the mandate creates more paperwork for legitimate businesses. Remember, small businesses don’t have teams of lawyers and compliance officers to keep up with the latest state and federal rules. Usually, at a small business, the compliance officer is the owner, the same person who empties the trash and locks up at night.
And if there’s a change in ownership, they’ll have to file more paperwork.
As state director of NFIB, Indiana’s leading small business advocacy organization, I’m especially angry over the fact the Corporate Transparency doesn’t apply to big or even medium-sized businesses.
It applies only to companies with 20 or fewer employees – which is most small businesses in Indiana.
On top of all that, the Corporate Transparency Act would create a database of individuals that could be used by federal, state, local, or tribal law enforcement agencies for practically any reason. Over the past several years, hackers have stolen people’s personal information from several federal databases. This database of Main Street business owners would be a tempting target.
Earlier this month, I joined a group of NFIB small business members from Indiana on a trip to Washington, where they met with senators and representatives about the need to repeal this ill-conceived legislation.
We need Indiana’s congressional delegation to support the Repealing Big Brother Overreach Act, legislation that would strike the beneficial owner mandate from the books before anyone gets hurt.
Our members understand the need to crack down on money launderers and other criminals, but the Corporate Transparency Act won’t help law enforcement do that. It’ll just create extra work for law-abiding owners trying to keep the doors open during difficult economic times.
Natalie Robinson is the Indiana director of the National Federation of Independent Business.
