The Corporate Transparency Act: Impact on Small Businesses

The U.S. Treasury Department, often involved in legislative changes, exemplifies Washington’s trend of misnaming laws. The Inflation Reduction Act, for instance, was a tax-and-spend law aimed at curbing inflation but amounted to a $2 trillion expenditure. Similarly, the Affordable Care Act increased healthcare regulation, reducing competition and elevating costs.

The Corporate Transparency Act, another such measure, imposes a broad federal reporting regime on countless small businesses. Despite its name, which implies holding large corporations accountable, the law predominantly affects small entities. It requires small business owners and even volunteer leaders of neighborhood associations to disclose sensitive personal information under threat of penalties. Larger corporations, however, remain mostly exempt.

The law raises questions about the efficiency of such mandates. The government’s track record in anti-money-laundering efforts shows that while millions of suspicious activity and currency transaction reports are filed yearly, only a small percentage are reviewed. As a result, only about 1% of laundered money is intercepted.

The current administration has enforced the Corporate Transparency Act by mandating small business owners provide personal information, treated as potential threats despite evidence of no wrongdoing. This compliance burden even affects changes in leadership within homeowner associations.

President Trump’s Treasury Department sought to alleviate some of these burdens, but legislative repeal is necessary for permanent relief. The Repealing Big Brother Overreach Act, supported by 193 co-sponsors and endorsed by the National Federation of Independent Business, aims to repeal the Corporate Transparency Act. Although not included in the House’s National Defense Authorization Act, the Act’s repeal enjoys wide support.

Ensuring small businesses are free to focus on growth rather than excessive compliance is crucial. Making the repeal of the Corporate Transparency Act permanent would protect these entities from onerous reporting demands. It is now up to Congress to act on behalf of small businesses across the nation.

Warren Davidson is a member of the House Financial Services Committee representing Ohio’s 8th District.