Notable Developments
- Lawmakers ramp up pressure on FinCEN
- Revisiting compliance cost estimates
- Trump officials slam CTA
- FinCEN offers limited filing relief
- Physicians join the legal fight
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Legislative Update
Last week more than 40 lawmakers sent a letter to FinCEN requesting a one-year delay of the CTA’s fast-approaching reporting deadline. The effort was led by Congresswoman Lisa McClain (R-MI) and cites ongoing concerns over the lack of awareness among affected businesses when it comes to their new compliance obligations, the confusion surrounding several ongoing legal challenges, and other critical issues.
As we wrote in a recent post, the letter helps put this issue back on the forefront of lawmakers’ minds as they enter the lame duck session. So while time is quickly running out, we still have some viable legislative paths to enact a delay.
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Regulatory Update
One aspect of the CTA debate that’s largely gone ignored by policymakers is the estimated cost burden on the small business community.
How much will affected entities spend to comply with the new regulatory regime? Per FinCEN’s own estimates, the first year cost is a whopping $21.7 billion, and $3.3 billion each year going forward.
But that’s likely on the low end, given the analysis was based on a traditional understanding of “owner,” rather than FinCEN’s far more complex definition of “beneficial owner.” Per the agency’s analysis in its final rule, the range of total estimated costs – depending on complexity – reaches $85.1 billion on the upper end in Year 1, with an additional $13.1 billion each subsequent year. That’s a staggering figure and amounts to a massive backdoor tax on the Main Street business community.
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Political Update
A recent tweet from our friend and ally Carol Roth highlights opposition to the CTA from key members of the incoming Trump administration. The first comes from former SBA Administrator Linda McMahon, who is running the Trump transition team and is slated to become the next Commerce Secretary:
It also serves as a useful reminder that Vice President-elect JD Vance is no fan of the CTA either:
As the transition continues we remain hopeful for a more definitive signal from the Trump administration that they will bury this ill-conceived law.
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Regulatory Update (Part 2)
FinCEN has previously signaled that it will not act unilaterally to delay the CTA’s filing deadline, citing a lack of statutory authority. That flies in the face of the ongoing 1099-K threshold saga, which Treasury has delayed for years now, as well as a recent announcement from FinCEN that it would provide relief from the CTA for entities impacted by recent natural disasters:
The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has announced that certain victims of Hurricane Milton, Hurricane Helene, Hurricane Debby, Hurricane Beryl, and Hurricane Francine will receive an additional six months to submit beneficial ownership information reports, including updates and corrections to prior reports.
FinCEN has issued five Notices extending the filing deadlines to for reporting companies that 1) have an original reporting deadline beginning one day before the date the specified disaster began and ending 90 days after that date, and 2) are located in an area that is designated both by the Federal Emergency Management Agency as qualifying for individual or public assistance and by the Internal Revenue Service as eligible for tax filing relief.
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Legal Update
On October 28th four individual plaintiffs joined with the Association of American Physicians & Surgeons in suing FinCEN in the US District Court for the Northern District of Texas.
As a reminder, there are now ten cases in various courts across the country challenging the validity of the CTA. Here are the links:
- Alabama (appealed): NSBA et al v. Yellen (11/15/2022)
- Ohio: Robert J. Gargasz Co., L.P.A. et al v. Yellen (12/29/2023)
- Michigan: Small Business Association of Michigan et al v. Yellen (3/1/2024)
- Maine: William Boyle v. Yellen (3/15/2024)
- Texas: NFIB et al v Yellen (5/28/2024)
- Massachusetts: BECMA et al v Yellen (5/29/2024)
- Oregon: Firestone v Yellen (6/27/2024)
- Utah: Taylor v Yellen (7/29/2024)
- Virginia: Community Associations Institute v. Janet Yellen (9/10/2024)
- Texas: Association of American Physicians & Surgeons et al v Yellen (10/28/2024)