More good news on the battle over privacy. Treasury’s Financial Crimes Enforcement Network on Friday released the following statement:
[T]he Financial Crimes Enforcement Network (FinCEN) is issuing an interim final rule that removes the requirement for U.S. companies and U.S. persons to report beneficial ownership information (BOI) to FinCEN under the Corporate Transparency Act.
In that interim final rule, FinCEN revises the definition of “reporting company” in its implementing regulations to mean only those entities that are formed under the law of a foreign country and that have registered to do business in any U.S. State or Tribal jurisdiction by the filing of a document with a secretary of state or similar office (formerly known as “foreign reporting companies”). FinCEN also exempts entities previously known as “domestic reporting companies” from BOI reporting requirements.
A couple of thoughts. First, this action clears up any remaining confusion as to whether domestic entities needed to file their beneficial ownership information. With Friday’s announcement, filing your information “just to be safe” no longer appears necessary. Big shout out to the new team at Treasury for getting these changes out the door so quickly. It could not have been easy.
Second, while the new rules alleviate the need to file, this relief is temporary. As long as the underlying CTA statute remains in place, a future administration could rewrite the rules to be more expansive.
That means permanent relief will have to come from the courts or Congress. The courts are teed up to act quickly, with pro-business rulings coming from District Courts in Alabama, Texas and Michigan just in the past year. Those rulings focused on the lack of constitutional authority underpinning the CTA as well as the damage it does to the protections of speech, association, federalism, and warrantless searches. As the recent Michigan decision noted:
The CTA’s reporting requirements reach indiscriminately across the smallest players in the economy to extract and archive a trove of personal data explicitly for future law enforcement purposes at an expected cost to the reporting players of almost $22 billion in the first year alone. The Fourth Amendment prohibits such an unreasonable search.
The CTA’s overreach is almost comical – thirty million law abiding small businesses and other legal entities forced to report the personal information of perhaps one-hundred million owners and their employees? The sheer scale of it suggests a successful challenge is a distinct possibility.
Failing that, however, Congress will have to act. It won’t be easy – support for the CTA extends across the aisle – but legislation to repeal the CTA has already been introduced, and the committees of jurisdiction are chaired by strong critics of the law – Representative French Hill of Arkansas and Senator Tim Scott of South Carolina.
An upcoming hearing in the House Financial Services Committee should give businesses a good idea of how the new congressional leadership intends to close the book on the CTA for good. It’s a bad idea that should never have been implemented in the first place.