A coalition of small businesses, U.S. senators and representatives sent a letter to the Biden administration calling for a one-year delay in a new rule requiring businesses with as few as 20 employees to report financial information about the business’ beneficial owners.
Under the rule, small businesses will be required to report personal information about their owners, board members, senior management and legal representation and could face civil or even criminal penalties for failure to do so.
“While the goal of this new law is to target shell companies involved in illicit financial transactions, the CTA defines covered entities as those having 20 or fewer employees and under $5 million in revenue. In other words, not just shell companies, but nearly every small business in America,” the letter said.
The coalition sent the letter to the Financial Crimes Enforcement Network, saying the new rule, which is set to take effect Jan. 1, affects nearly 33 million businesses, many of whom are unaware of the new regulatory requirement.
The National Federation of Independent Businesses released a survey in August showing that 90% of small business owners were unaware of the new reporting requirement.
“NFIB is pushing for a full repeal of this legislation,” Government Relations Director Jeff Brabant said in a statement at the time. “We feel it’s unnecessary; however, administratively there is a chance that FinCEN delays it, and there’s also a chance that Congress delays it for one year. The statute allowed for up to two years for reporting for companies once this is passed on January 1; however, FinCEN chose one year. So FinCEN can choose to delay it another year and that’s something we hope they do.”
The coalition letter also raised concerns about the security of the personal information.
“Further, FinCEN has yet to finalize the two final BOI rulemakings that are critical to protecting small businesses’ personal information,” the letter said. “These include the ‘Access Rule,’ and the “Customer Due Diligence Rule”. As you know, the Access Rule specifies the parameters around which the database can be accessed, the purposes for which the information can be used, and how the highly sensitive information will be protected. The Customer Due Diligence Rule is critical to make sure BOI would not result in a duplicative reporting regime for small businesses.”
