Earlier today, more than 100 trade associations urged Treasury to take immediate action to protect small business owners from unnecessary privacy and cybersecurity risks stemming from the Corporate Transparency Act (CTA).
The letter was led by the Main Street Employers Coalition and calls on Treasury to purge the CTA database of beneficial ownership information submitted by domestic entities that are no longer required to file. It also asks Treasury to quickly finalize the rule formally exempting U.S. businesses from the reporting requirement.
As the letter makes clear, the CTA was designed to combat illicit finance, not to warehouse sensitive personal information from small business owners who pose no risk to national security:
Last year, the Administration took the important step of narrowing the CTA’s scope to apply to foreign entities only. That action provided much-needed relief to over 32 million domestic businesses swept into a regime intended to target international money laundering and terrorism financing, not law-abiding American business owners.
Before Treasury corrected course, some 16 million domestic entities had complied with the CTA’s reporting requirements. These beneficial owners’ sensitive personal information – including their names, addresses, and passport or driver’s license numbers – remains in a database managed by the Financial Crimes Enforcement Network, exposing them to ongoing cybersecurity and unauthorized disclosure risks.
So while domestic reporting is no longer required, the risk to those business owners who already filed hasn’t disappeared. Meanwhile, there is no legitimate justification for continued retention, a point raised by more than 90 members of Congress a few months back.
The letter also highlights the urgency behind the request, particularly in the context of recent activity in the courts:
The legal landscape surrounding the CTA reinforces the urgency of this request. There are now twelve federal cases challenging the validity of the CTA, including two that have ruled at the District Court level that the CTA is unconstitutional – National Small Business United v. Yellen and Small Business Association of Michigan v. Yellen in the Western District of Michigan. While the Eleventh Circuit recently reversed the NSBA ruling, that case is headed to the Supreme Court and the constitutional questions surrounding the CTA are far from settled.
Main Street employers shouldn’t be asked to “trust the process” while their personal information sits in limbo. Treasury took a welcome step when it narrowed the CTA’s scope last Spring. The next step is clear: purge the database and finalize the rule so Main Street businesses can move forward with confidence.