Thousands of Texas business owners will be faced with unjust fines from the federal government for failure to complete newly implemented Beneficial Ownership Information reports.
In compliance with the Corporate Transparency Act, which was passed by Congress in 2021, companies must report ownership and beneficiary information to the Financial Crimes Enforcement Network (FinCEN). Companies must identify their business owners with full legal names, birthdates, addresses and additional factors. The reporting window opened on January 1st, 2024, and companies have until January 1st, 2025 to complete the process.
The primary stated goals of the Corporate Transparency Act include the prevention of illicit activities such as money laundering, as well as protecting financial institutions and national security.
Businesses and their owners who fail to complete the reporting requirements by the deadlines will be faced with hefty fines and penalties. Civil fines of up to $500 a day can be levied for persistent violations, and criminal penalties of up to 2 years in prison and a $10,000 fine can be applied as well.
On March 1st, 2024, the Corporate Transparency Act was ruled unconstitutional by a federal district court in Alabama, based on a determination that the law exceeds the Constitutionally granted Enumerated Powers of Congress. Unfortunately, however, the ruling is only being applied to the plaintiffs in the lawsuit: Isaac Winkles, the National Small Business Association, and the NSBA’s member companies. All other corporate entities will still be required to submit reporting to FinCEN, as the Alabama ruling has been challenged.
Due to the common longevity of litigative procedures, all businesses not in collaboration with the NSBA must assume that the requirements of the Corporate Transparency Act will be applied to them. Herein lies the issue of further unnecessary and regulatory federal procedure being applied to small businesses. Many business owners are, and will continue to be, unaware of their newly implemented obligations and face unfair and excessive punishment for failure of compliance. Texas State House Rep. Matt Schaefer warned any and all LLC proprietors of this likely reality on Tuesday through his account on X (formally known as twitter).
“The number of people who are going to get fines for failing to file the newly mandated federal Beneficial Ownership Information reports is incredible,” Schaefer wrote while subsequently encouraging his followers to spread the word.
Texans for Fiscal Responsibility wants all Texas business owners to be informed of these new regulations, while we await further litigation.
Meanwhile, concerned citizens should consider contacting their representatives in Congress and demand an immediate repeal of the Corporate Transparency Act’s reporting requirements on small businesses.
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