The trick to writing good legislation is coming up with something that doesn’t have bad side effects. Case in point: The Corporate Transparency Act of 2019 now being considered in Congress.
Supporters say they’re trying to help the government stop crime. In practice, it would put North Carolina’s small, family-run businesses in a tough spot.
Put simply, it would require most small businesses with fewer than 20 employees to provide the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) with information on everyone with at least a 25 percent ownership stake in the business. The idea is that these reports would help law enforcement crack down on money laundering and other financial crimes.
The problem is that the Corporate Transparency Act would create extra costs and more paperwork for North Carolina’s small businesses while raising serious privacy concerns.
Paperwork is already a big problem for small businesses. According to the latest NFIB Small Business Problems and Priorities survey, federal paperwork ranks 12th out of 75 potential problems facing small businesses. If the Corporate Transparency Act becomes law, it would make federal paperwork an even greater distraction for entrepreneurs and divert time and resources the owners should spend on running and growing their businesses.
Unlike big corporations, small businesses don’t have teams of lawyers and compliance officers to keep up with new mandates, handle the paperwork and file the forms.
Small businesses, meanwhile, have an owner. Often as not, the person who’s responsible for filling out and sending in all those federal forms is the same person who works the register, sweeps up and signs the checks.
Those federal forms are a huge hassle for North Carolina’s small businesses.
According to proposed Corporate Transparency Act, owners would have to report the name, date of birth, address and current driver’s license or passport number of everyone with at least a 25 percent stake in the company and who “receives substantial economic benefits from the assets” of a small business. We’re still waiting to hear how the Treasury Department will define “substantial economic benefits.”
If a small business fails to file the paper, the owner could face a $10,000 fine, three years in prison, or both.
Just as troubling is the potential here for a massive breach of privacy. This legislation would give the federal government broad access to owners’ personal information — information that could be used by law enforcement for practically any reason and without a subpoena or warrant.
The Corporate Transparency Act is problematic legislation that would shift the reporting requirements from big banks, which are in the best position to handle the reporting requirements, to millions of small businesses, which are in the worst position to handle them.
That’s why NFIB is asking North Carolina’s congressional delegation to vote against the Corporate Transparency Act. It would place an unfair burden on law-abiding entrepreneurs and small business owners and make it even harder for them to grow their businesses and create new jobs.
Gregg Thompson is North Carolina state director of NFIB, the nation’s leading small business advocacy organization.