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Small Businesses Challenge Obscure New Federal Regulations

Small Businesses Challenge Obscure New Federal Regulations

Apr 23, 2024

Small Businesses Challenge Obscure New Federal Regulations

The Financial Crimes Enforcement Network (FinCEN) has implemented new regulations under the Corporate Transparency Act (CTA). The rules require newly formed businesses to disclose their "beneficial owners" to the federal agency within 90 days of their formation, while existing small businesses must comply by January 1, 2025.

The enforcement of these regulations has taken many small businesses by surprise, as they necessitate the reporting of personal details from individuals who may hold significant control over the company, irrespective of their financial stake. The Small Business Association of Michigan (SBAM) has responded with legal action, challenging the constitutionality of the CTA. Brian Calley, president and CEO of SBAM, criticized the act in an interview with The Epoch Times, stating, “They’re trying to create a database of tens of millions of businesses and all the decision-makers in those businesses [...] It’s essentially a warrant-less search.”

SBAM's lawsuit, which represents over 32,000 small-business owners, argues that the act requires the submission of sensitive information without any accusations of legal wrongdoing, potentially violating the Fourth Amendment. Calley expressed doubts about the federal government's authority to mandate such disclosures and highlighted the confusion among businesses about who qualifies as a "beneficial owner."

A key issue with the CTA is the limited public awareness of its existence, leaving many businesses at risk of non-compliance penalties, including a $500 daily fine and possible jail time. Gene Marks, a consultant with The Marks Group, acknowledges that the lack of publicity is problematic, predicting a rush to comply by the end of 2024.

Homeowners associations (HOAs) and condominium associations are also expressing concern over the CTA. Dawn Bauman of the Community Associations Institute (CAI) conveyed fears about the potential impact on property management and the apprehension surrounding the sharing of private information. The CAI sought an exemption from FinCEN but was informed that no exemptions are being considered at this time.

The new CTA regulations represent a substantial shift in federal oversight of small businesses, raising concerns about privacy, constitutional rights, and the lack of public awareness.

The Epoch Times Article


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