The Corporate Transparency Act (CTA) imposes new compliance on Main Street Americans with an LLC. What happens if you accidentally disobey this new law? You may end up behind bars.
The CTA requires individuals with “substantial control” over a company or equity position of 25 percent or more to disclose personal information to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN)—a government bureau for which most of Americans have never heard before.
For as long as I can remember, millions of law-abiding citizens have used LLCs to invest in real estate or simply protect their assets. In fact, over 32 million business entities are estimated to be affected by this law. Instead of focusing on the success of their businesses, owners must navigate unnecessarily complex regulations.
What a gross example of government overreach.
Let’s look at the instructions: Americans with a CTA filing obligation must report their name, date of birth, address and a scan of their government-issued photo ID to the Treasury Department. Whenever this information changes during the thirty days, it must be submitted to FinCEN’s database.
Failure to file with FinCEN can lead to a criminal penalty of up to two years in prison and civil penalties of up to $10,000 per violation.
Okay, let me get this straight. You can cross the border illegally, get money, plane tickets, cell phones, just to name a few benefits for the millions of illegal immigrants in this country, but if you dare not disclose personal information including a government-issued ID, you as the controlling member of an LLC can be fined or even jailed. So much for the American Dream!
What is the Federal Government’s rationale for requesting this information? The purpose of the CTA was to crack down on shell companies used to commit crimes. Do they really believe that lawbreakers will comply with this new law and file with FinCEN? Of course not. The law will simply place a huge administrative burden on millions of hard-working American business owners. Usually, instead of prosecuting the few who break the law, business owners who do their best to thrive are punished.
Who started this?
The legislation was championed by Oregon Senator Ron Wyden and former Representative Carolyn Maloney of New York and was inserted into the National Defense Authorization Act of Fiscal Year 2021. After a veto by then-President Trump and a subsequent vote in Congress, the bill became law on January 1, 2021 and entered into force this year.
Since it slipped through the cracks in DC, few in Washington and most outside the DC belt have no idea this law even exists. They certainly don’t know the severe criminal penalties associated with non-compliance.
What does this mean for small businesses? It means that the little boy has to fight with all the bureaucracy. LLCs with more than 20 employees and more than $5 million in revenue do not have to file with FinCEN. So where do they turn?
The small percentage of small business owners who are aware of the existence of the CTA are looking for guidance on compliance, but have few places to turn. Accounting and law firms do not want to take on the burden of exposing clients to filings, and many small business owners are unaware of the consequences associated with filing failure.
This leaves the door open to abuse by the IRS and prosecutors who are either politically motivated or simply have an ax to grind. The last thing we need is the CTA putting bad actors in our justice system.
To add insult to injury, FinCEN has done little or nothing to educate Americans about the CTA and the dire consequences of non-compliance.
US Senator Tommy Tuberville is introducing the Big Brother Override Act to overturn the CTA entirely. His bill would provide millions of small businesses and entrepreneurial Americans with regulatory and compliance relief and remove a weapon for political prosecution from corrupt prosecutors and the IRS.
If Congress fails to act on this legislation, millions of American small business owners could be in for a rude awakening next year.
Laura Johnston Clark is a wife, mother and businesswoman. She grew up in the Wiregrass and now lives in Birmingham with her husband, retired Air Force Col. David Etheredge. She is a member of the Alabama Republican Party.
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