July 25, 2024
Dear Chairman Brown and Ranking Member Scott:
The undersigned organizations, representing millions of small businesses, strongly support amending the FY2025 National Defense Authorization Act to delay by one year the Corporate Transparency Act’s (CTA) filing deadline.
Amendments sponsored by Senators Tim Scott (#2169) and James Lankford (#2831) would provide the business community and federal regulators additional time to educate millions of small business owners regarding the CTA’s new reporting requirements and the onerous penalties resulting if they fail to comply. They would also allow time for the on-going legal challenge to work its way through the courts while restoring Congress’s original intent to give covered entities a full two years to comply with the statute’s reporting requirements.
Although filing under the CTA began at the start of this year, only a few million businesses have registered while an estimated 28 million covered small businesses have yet to file. This compliance rate of less than 10 percent is a direct result of the general lack of awareness among business owners regarding the new rules. While the business community and FinCEN have gone to great lengths to educate small business owners, it is clear additional time is needed. Absent a delay, millions of law-abiding citizens will be at risk of steep fines and criminal penalties come the end of this year.
Recent court decisions have added to the confusion. In March, the United States District Court for the Northern District of Alabama found the CTA exceeded the Constitution’s enumerated powers and is therefore unconstitutional. That case was appealed and will be heard by an appellate court later this year. In the meantime, however, FinCEN continues to enforce the CTA against all small businesses and other entities not named in the lawsuit. This decision effectively creates two classes of small businesses – those NSBA members who are exempt and everybody else who must still comply.
Finally, in enacting the CTA lawmakers explicitly called for a reporting deadline of “not later than 2 years after the effective date of the regulations” for existing entities. This timeframe was designed to give affected entities sufficient time to learn of, understand and comply with the new reporting regime, while minimizing the burdens on reporting companies.
In its rulemaking, however, FinCEN shortened this deadline and gave existing entities just one year to comply. That decision is problematic both in its disregard of congressional intent and its practical implications for compliance rates. The CTA covers tens of millions of legal entities plus all those millions of individuals considered to be “beneficial owners,” yet the vast majority of the law’s targets remain wholly unfamiliar with their new compliance obligations. They simply need time to learn about the new law.
The one-year delay proposed by Senators Scott and Lankford in their respective amendments would address these challenges and they are consistent with legislation (H.R. 5119) which passed the House on a bipartisan 420-1 vote just last year.
The undersigned organizations therefore strongly urge you to support inclusion of these amendments as part of the FY2025 National Defense Authorization Act.
Cc: The Honorable Roger Wicker, Ranking Member, Senate Committee on Armed Services Sincerely,
Agricultural Retailers Association AICC, The Independent Packaging Association Air Conditioning Contractors of America American Building Materials Alliance American Council of Engineering Companies American Council of Independent Laboratories American Dental Association American Farm Bureau Federation American Financial Services Association American Foundry Society American Hotel & Lodging Association American Lighting Association American Pipeline Contractors Association American Rental Association American Subcontractors Association American Supply Association American Veterinary Medical Association AmericanHort America’s SBDC Associated Builders and Contractors Associated Equipment Distributors Associated General Contractors of America Brick Industry Association Ceramic Tile Distributors Association Colorado Cattlemen’s Association Community Associations Institute Construction Industry Round Table Design-Build Institute of America Education Market Association Energy Marketers of America Family Business Coalition FCA International Finseca Foodservice Equipment Distributors Association Forest Resources Association GAWDA Global Cold Chain Alliance Hardwood Federation Hearth, Patio & Barbecue Association Heating, Air-conditioning, & Refrigeration Distributors International ICSC Independent Bakers Association Independent Electrical Contractors Industrial Fasteners Institute International Franchise Association International Housewares Association International Sign Association Irrigation Association ISSA, The Worldwide Cleaning Industry Association Leading Builders of America Main Street Employers Coalition Manufactured Housing Institute Manufacturer & Business Association Marine Retailers Association of the Americas Metals Service Center Institute Michigan Farm Bureau Nareit National Apartment Association National Association of Convenience Stores National Association of Electrical Distributors National Association of Home Builders National Association of Sporting Goods Wholesalers National Association of Wholesaler-Distributors National Automatic Merchandising Association National Community Pharmacists Association National Cotton Council National Council of Agricultural Employers National Electrical Contractors Association (NECA) National Electrical Manufacturers Representatives Association (NEMRA) National Fastener Distributors Association National Funeral Directors Association National Grange National Lumber & Building Material Dealers Association National Marine Distributors Association National Multifamily Housing Council National Onion Association National Propane Gas Association National Ready Mixed Concrete Association National Restaurant Association National Roofing Contractors Association National RV Dealers Association (RVDA) National Small Business Association National Tooling and Machining Association National Utility Contractors Association National Wooden Pallet & Container Association New Mexico Farm & Livestock Bureau North American Association of Food Equipment Manufacturers (NAFEM) North American Equipment Dealers Association NYS Agribusiness Association Ohio Farm Bureau Federation Oregon Cattlemen’s Association Outdoor Power Equipment and Engine Service Association Pennsylvania Farm Bureau Performance Racing Industry (PRI) Plumbing-Heating-Cooling Contractors–National Association Power & Communication Contractors Association Precision Machined Products Association Precision Metalforming Association PRINTING United Alliance Private Investor Coalition Professional Beauty Association Refrigerated Foods Association Retail Bakers of America Rocky Mountain Agribusiness Association S Corporation Association Service Station Dealers of America and Allied Trades Small Business & Entrepreneurship Council Small Business Legislative Council (SBLC) Society of Collision Repair Specialists (SCRS) South Dakota Trust Association Southeastern Lumber Manufacturers Association Specialty Equipment Market Association (SEMA) Subchapter S Bank Association Texas Farm Bureau Textile Care Allied Trades Association The Association for Hose and Accessories Distribution The Fertilizer Institute The Ohio Council of Retail Merchants The Real Estate Roundtable The Transportation Alliance The Wholesale Florist and Florist Supplier Association Tile Roofing Industry Alliance Tire Industry Association Truck Renting and Leasing Association U.S. Chamber of Commerce US Rice Producers Association USA Rice Virginia Cattlemen’s Association Virginia Farm Bureau WASDA – Water and Sewer Distributors of America Wholesale Florist & Floral Supplier Association Wood Industry Association Workplace Solutions Association Wyoming Farm Bureau Federation Wyoming Stock Growers Association
