Unless Congress acts quickly, America’s small business owners preparing for Christmas may soon get a visit from the Compliance Grinch. carry a fine And you could end up in jail down the chimney.
New beneficial ownership information reporting requirements based on Corporate Transparency Act (CTA) intends to trap millions of business owners across the country without their knowledge. Although the stated purpose of this law was to combat money laundering, terrorist financing, and other illegal activities, the burden placed on small businesses, especially during the holiday season, far exceeds the intended benefits.
As Christmas approaches, policymakers should consider delaying reporting requirements to provide relief to small businesses. Here’s why the CTA poses significant challenges and why a reprieve is urgently needed.
First, the CTA requires small and medium-sized enterprises to disclose detailed information about their “beneficiaries” to the Financial Crimes Enforcement Network (FinCEN). This includes anyone who owns or controls at least 25% of the business or who exercises substantial control over the business. For small businesses, the busiest time of the year is already straining, and the timing couldn’t be worse. Entrepreneurs juggling inventory, staffing, and holiday sales must also navigate a maze of new management requirements.
Penalties for violations under the CTA are severe, with fines of up to $10,000 and up to two years in prison. For small business owners struggling to keep up with holiday demand, the risk of unintentional mistakes is high. Compounding the problem, as of early December, only 10 million of the 36 million eligible businesses had filed, and by the end of the year, more than 20 million small businesses would be out of compliance. It suggests that it will disappear.
That’s right, millions of small businesses are under fire right now, and the majority of them probably have no idea about the requirements or consequences of non-compliance.
The Christmas season is a competitive time for many small businesses, and the threat of punitive fines adds unnecessary anxiety during an already stressful time. Acknowledging the delay in reporting requirements will free up entrepreneurs to focus on what matters most: serving their customers and completing the year successfully.
The holiday season should be a time of joy and connection, not a time for small business owners to worry about potential data breaches or invasions of privacy. The CTA requires the collection of sensitive personal information such as beneficiary names, addresses, and identification numbers. The law also requires a photo of each beneficiary’s license or passport. FinCEN is tasked with protecting this data, but a centralized database is a potential target for cyberattacks and abuse. Delaying CTA reporting deadlines allows for better preparation and security measures, ensuring compliance without rushing into risky systems.
The CTA exempts many large companies from reporting requirements, including publicly traded companies and certain nonprofit organizations. These exemptions effectively shift the burden of compliance to small and medium-sized businesses that already face inflation, supply chain disruptions, and seasonal pressures.
For many small businesses, the fourth quarter is the most important time of the year, often determining whether they end the year in the black. Imposing these reporting requirements now ignores the reality that small businesses need support, not additional hurdles, at this critical time.
With Christmas just around the corner, policymakers have a clear opportunity to provide relief to small business owners.
A court recently issued an injunction on this requirement, but the decision is currently under appeal, highlighting the need for Congress to act. By delaying CTA reporting requirements, Congress will reduce administrative burdens on small businesses during their busiest periods, provide time for better education and resources to ensure compliance, and demonstrate support for Main Street America. , can send a strong message that small and medium-sized businesses are important. Without relief, the Corporate Transparency Act risks becoming the Grinch stealing Christmas from millions of hard-working small business owners.
Delaying reporting requirements would not only provide much-needed relief, it would also demonstrate that policymakers understand the important role that small businesses play in their communities.
But temporary delays are not enough. President-elect Donald Trump should announce that his administration will permanently cancel the CTA’s onerous reporting requirements.
On the other hand, we cannot allow onerous regulations to rob Main Street of its joy and prosperity this holiday season. Instead, give small businesses the gift of freedom to focus on their customers, their families, and their futures. It’s time for Congress and the next administration to protect Christmas for small businesses and prevent the CTA from becoming the Grinch who stole Christmas.
James Carter led President-elect Donald Trump’s tax team during the 2016-2017 transition. He served as Assistant Secretary of the Treasury from 2002 to 2006 and Assistant Secretary of Labor from 2006 to 2007.
Palmer Schoning is president of the Family Business Coalition of 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.
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