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For small business owners, new federal reporting rule presents an unwanted New Year’s Eve countdown

Note: Here are excerpts from a MSPC article that ran in National Review on December 17

While most of us look forward to the promise that a new year brings, for more than 27 million American small businesses, the clock will begin ticking for a new reporting requirement to a federal agency that most of us have never heard of.

Arising from the Corporate Transparency Act, the Beneficial Ownership Information Reporting Rule, or BOI Reporting Rule, creates a federal obligation for most entities created or registered to do business in the U.S. to disclose personal information about their beneficial owners, senior officers, and other control persons to the Financial Crimes Enforcement Network (FinCEN), unless exempt.

FinCEN is a bureau of the U.S. Department of the Treasury and most known for its administration of the Bank Secrecy Act to combat money laundering and terrorism financing. The BOI Reporting Rule is a disquieting expansion of the agency’s authority and will doubtless require a significant expansion of its budget and full-time payroll.

According to FinCEN, the rule is intended to prevent “criminals, Russian oligarchs, and other bad actors” from laundering money in the U.S., but the practical effect is to punish millions of small businesses with yet another reporting requirement and layer of regulatory record-keeping with steep fines and penalties for failure to comply. Beginning January 1, businesses will have one year to file their initial report with FinCEN or face civil penalties of up to $500 per day and criminal penalties of up to $10,000 and two years of imprisonment.

If you want to know whether your business is required to report, you will need to review the agency’s “Small Entity Compliance Guide,” which helpfully explains FinCEN’s goal to “reduce the burden on small businesses by providing comprehensive guidance and communicating information about the reporting requirements in plain language.” It takes 57 pages to do that, including various Yes/No flow charts to help a business determine whether it is required to report and which officers and individuals must be identified.

In most cases, unless the business falls under one of 23 enumerated exemptions, it will be required to report. If a change occurs as defined by the rule, businesses will have 30 days to report them . . . American small businesses are subject to layer upon layer of government authority and taxation. As the decades fly by, it becomes increasingly costly and difficult for businesses to comply. As with most new government rules, the good intentions are always touted by well-meaning sponsors.

Who doesn’t want to stop Russian oligarchs and drug lords from laundering money in the U.S.? But America’s 27 million small-business owners are not the problem, and it is not the federal government’s role to hijack the regulation of 100 percent of these businesses in order to identify a tiny minority of potentially problematic ones.

You can read MSPC's entire National Review article online here: Washington D.C. to Ring In the New Year by Sticking It to Small Business

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