U.S. House-Approved Bill Would Delay Corporate Transparency Act Requirements

Before breaking for their December recess, lawmakers in the U.S. House of Representatives approved a bipartisan bill, H.R. 5119, the Protect Small Business and Prevent Illicit Financial Activity Act sponsored by Reps. Joyce Beatty (D-Ohio) and Zach Nunn (R-Iowa), that would extend key deadlines under the Corporate Transparency Act (CTA). The vote was 420-1.

As of January 1, 2024, the CTA requires nearly every U.S. business to report, and to continuously update, information regarding their beneficial owners. If companies do not comply, they will face civil and criminal penalties of up to $10,000 and two years of jail time. Reporting entities have until the end of the year to report this information, so Congress still has time to act. But to provide relief, the U.S. Senate must, as soon as possible, approve H.R. 5119 and President Joe Biden must sign it into law.

Under H.R. 5119:

• Entities formed in 2024 would have to file their initial reports no later than 90 days after their creation, up from a proposed 30 days;
• Entities formed after 2024 would also have 90 days to report, up from the current 30 days; and
• Entities needing to update their reports would also have 90 days, again, up from 30 days under current rules.

There is support for H.R. 5119 in the upper chamber of Congress. As the S-Corp Association reported, a bicameral group of more than 80 U.S. senators and U.S. representatives sent a letter to the Financial Crimes Enforcement Network (FinCEN) calling for a one-year delay of all reporting requirements under the CTA. The group noted, “FinCEN is woefully behind in educating small business owners and stakeholders of their new obligations under the CTA … In fact, a National Federation of Independent Business (NFIB) survey found that 90 percent of respondents were entirely unfamiliar with these reporting requirements.” The lawmakers concluded, “This lack of awareness and education is alarming and must be addressed before the law is implemented.”

As a reminder, MSCI joined with the S-Corp Association and dozens of other groups to send a letter last November asking federal lawmakers to delay the CTA’s reporting requirements by one year. That additional time would give FinCEN enough time to finish its work on the regulatory front to educate companies about their need to comply with the requirements. Read more here.