As a former member of Congress and president and CEO of the Ohio Chamber of Commerce, I’ve seen many bad bills enacted into law. The Corporate Transparency Act is one of the worst.
Why is it so bad?
The CTA is the first law I have ever seen that explicitly exempts big businesses while targeting Main Street job creators. It applies to entities with 20 or fewer employees or $5 million or less in revenues. Treasury estimates more than 32 million entities will be required to file this year, including hundreds of thousands located in Ohio.
Most of these businesses have never heard of the CTA. What is it?
The CTA requires virtually every small business in Ohio to report and regularly update the personal information of their so-called “beneficial owners” to the Treasury Department. Covered entities must submit the full name, date of birth, home address and picture ID of all their beneficial owners. If any information changes — say a covered individual moves or leaves their job — the business has 30 days to notify the federal government. Failure to do so could mean fines of $590 a day and a felony charge with up to two years in jail.
If the beneficial owner concept — the person who ultimately benefits from the business — sounds simple, think again. Under Treasury’s expansive definition, it includes anybody who exercises “substantial control” over the business. That clearly includes boards of directors and senior managers. It might also include consultants, advisors and even spouses. Who can say?
This much gray area, coupled with those harsh penalties, means Ohio’s small businesses will be forced to hire outside counsel to make sure they get it right, keep everything updated, and keep everybody out of jail.
What’s the point? Proponents claim the CTA will help Treasury track down criminals who use shell companies to launder money. But the CTA relies on self-reporting, so the local barbershop will spend thousands on legal help to stay compliant and out of jail while the real criminals will simply ignore the law or submit false information.
No one engaged in real illegal activity is going to volunteer the details of their criminal operations.
There’s also the issue of warehousing the personal information of nearly 100 million individuals at a federal agency with a spotty track record of keeping their databases secure. If foreign hackers don’t get to it first, radical activists are calling for the data to be made public so they can name and shame anyone who disagrees with them.
To summarize, the CTA targets law-abiding small business owners, saddles them with hefty compliance costs and the threat of fines and jail time, and puts the sensitive personal information of tens of millions of Americans at risk, all while doing nothing to prevent money laundering.
Fortunately, there’s a commonsense remedy to this madness. A federal court in Alabama recently ruled the CTA is unconstitutional. That decision will be reviewed by the 11th Circuit at the end of the month. A favorable ruling there could put this ill-conceived statute to rest.
At the same time, legislation to delay the CTA’s year-end reporting deadline cleared the House in December 420-1 and is now before the Senate. A swift decision in the Senate would benefit business owners everywhere. As chairman of the banking committee, Sen. Sherrod Brown’s support is necessary to advance this legislation.
Brown now has the chance to become a champion for Ohio businesses. If you share my concerns about the CTA’s impact, reaching out to Brown could make a difference. A simple decision from him would provide much-needed relief to Ohio’s business community.
(Stivers is president and CEO of the Ohio Chamber of Commerce)
This post was originally published on here
