The National Roofing Contractors Association is among the many trade associations putting their support behind legislation that repeals the Corporate Transparency Act, which critics say is a hindrance to small businesses.
Enacted in 2021, the Corporate Transparency Act became effective as of Jan. 1, 2024. It requires newly-formed companies to provide the personal information of the business’ owners and beneficiaries, including addresses and Social Security Numbers. The act is estimated to affect about 32.6 million businesses.
In other words, if someone owns 25% or substantially controls a company, they must provide that information and report it to FinCEN, the Department of Treasury’s financial crimes arm. The law defines shell companies as any legal entity with 20 or fewer employees or $5 million or less in revenues. The penalty for non-compliance is $500 a day plus potential imprisonment of up to two years.
“Unfortunately, this legislation does little to catch criminals but does inflict criminal penalties on law-abiding business owners if they do not file this information or fail to follow the confusing definitions regarding who is required to file under this law,” the NRCA said in a statement on its website.
The law is intended to combat money laundering, tax fraud and other crimes and has since faced criticism and legal challenges. In March, a federal judge in Alabama ruled the act to be unconstitutional “because it cannot be justified as an exercise of Congress’s enumerated powers.”
However, this doesn’t mean the act is finished. The resulting injunction from the judge’s ruling applies only to the filing plaintiffs, who are members of the National Small Business Association.
Sen. Tommy Tuberville (R-Ala.) announced that he had introduced the Repealing Big Brother Overreach Act, while Congressman Warren Davidson (R-Ohio) introduced its companion legislation in the House. The bill seeks to repeal the act in its entirety.
“The Corporate Transparency Act is big-government overreach at its worse,” said Tuberville in a written statement. “The Biden Treasury Department is attempting to create a database on every American business owner. Failure to register by the end of the year could land you in jail. This unprecedented intrusion into personal privacy must be stopped.”
In a joint letter to Tuberville, nearly 100 trade organizations, including the NRCA, supported his legislation, saying it would “put an end to this poorly constructed and onerous reporting regime.”
“Despite its unprecedented scope, we expect the CTA to be of little practical use to law enforcement, as criminals are unlikely to accurately self-report their information to FinCEN,” the letter states. “Meanwhile, because the CTA targets entities with low revenues and few employees, the brunt of its reporting burden and excessive penalties will be shouldered by law-abiding, Main Street businesses.”
Other organizations supporting the bill include the National Federation of Independent Business, the American Subcontractors Association, the Tile Roofing Industry Alliance and Americans for Tax Reform.
