Reporting requirements for businesses in the name of corporate transparency are unfairly targeting small businesses, the Air Conditioning Contractors of America (ACCA) believes.
In conjunction with a hearing held about the implementation of these regulations, ACCA sent a letter highlighting the additional burden these regulations place on businesses.
On April 30, the House Small Business Committee held a hearing to address the implementation of the Corporate Transparency Act (CTA) by the federal government and the Financial Crimes Enforcement Network (FinCEN). The CTA was enacted as part of the 2021 National Defense Authorization Act and requires LLCs and other covered entities to report personal and financial information about the organizations, their owners, and their managers. The hearing focused specifically on the increased regulatory burden CTA enforcement places on small businesses in respect to reporting and compliance.
Companies affected by CTA are required to file a beneficial ownership report by January 1, 2025 if they were created or registered to do business prior to January 1, 2024. Companies created or registered on or after January 1, 2024, and before January 1, 2025 will have 90 calendar days after receiving notice of the company’s creation or registration to file their reports. More information about reporting requirements can be found on FinCEN’s website. FinCEN has also published a Beneficial Ownership Information Small Entity Compliance Guide which can be found here.
In conjunction with the hearing, ACCA President and CEO Barton James sent a letter to Senator Tommy Tuberville and Representative Warren Davidson who introduced legislation to repeal the CTA. The letter states:
This law unfairly targets small businesses, including many of our members, by classifying any entity with fewer than 20 employees or under $5 million in revenues as a “shell company.” This sweeping definition mandates extensive reporting of “beneficial owners” to FinCEN, covering everyone from owners to any influential person within the company.
FinCEN’s current expectation of receiving over 32 million such reports annually attests to the CTA’s excessive reach and the impracticality of its enforcement. The law’s effectiveness is further doubtful as it relies on self-reporting by the very individuals it seeks to regulate. Furthermore, the recent District Court ruling in Northern Alabama, which found the CTA to exceed constitutional bounds, highlights the Act’s legal fragility. Despite this, many small businesses remain under the threat of severe penalties for non-compliance.
Any person who ‘willfully violates’ CTA’s beneficial ownership reporting requirements may be subject to a civil penalty of up to $591 for each day that the violation continues. They may also be subject to criminal penalties up to 2 years imprisonment and a fine of up to $10,000. Violations include willfully neglecting to file a beneficial ownership report, willfully filing false beneficial ownership information, or willfully failing to correct previously filed beneficial ownership information.
ACCA encourages members to consult with their legal counsel or advisors regarding CTA compliance and reporting requirements.