With just weeks to go before tens of millions of small businesses and other entities faced their rights being trampled and being unwittingly turned into felons, a nationwide injunction against Treasury Department enforcement of an obscure reporting rule required by the Corporate Transparency Act has gone into effect.
While this injunction offers small business owners a temporary reprieve against the "beneficial ownership information" (BOI) rule, they need more certainty.
Jan. 1, 2025, was the deadline to comply with this rule that treated small business owners like financial criminals. It forced anyone with an entity, even solo-business owners with LLCs, S-corporations or other entities, as well as certain homeowners association boards, to register personal information with the financial crimes division of the Treasury (FinCEN).
This information includes copies of a driver's license or passport for every person in their business or entity who was an owner or who made "meaningful decisions" about the business. This information also has to be updated every time it changes. In addition to the invasive and unconstitutional mandate, the rule set forth fines of nearly $600 a day and jail time for non-compliance.
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Yet, the rule exempted large businesses from having to participate.
The stated reason for this rule is beyond the realm of absurdity – to prevent terrorism, money laundering and cartel activity – as if anyone engaged in terrorism, money laundering or cartel activity would proactively register with FinCEN or any other U.S. government entity. With big businesse – the ones more likely to have the resources to engage in unsavory activity – exempt, this rule has targeted small business owners, potentially turning them into felons.
While most small business owners who know about this rule didn’t want to comply because of its tyrannical asks, even more didn’t know about it. House Small Business Committee Chair Rep. Roger Williams, R-Texas, who has written several letters against BOI as it currently stands, posted on X (formerly Twitter) that, "only 14.2% of small businesses in Texas have submitted compliance with the BOI rule."
Many entities and individuals have been fighting against this rule on behalf of the nation’s 34 million small businesses. I went to Congress to testify against it earlier this year. The National Federation of Independent Business (NFIB), The S Corporation Association, The National Small Business Association (NSBA) and others have been working hard trying to put a stop to it.
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Following a federal court ruling this spring on a NSBA-led lawsuit which found this rule unconstitutional but limited the scope only to the plaintiff, a lawsuit brought by the Center for Individual Rights (CIR) in conjunction with the NFIB and other small businesses prevailed in getting a Texas judge to grant a nationwide injunction against enforcement of the BOI rule so that small businesses do not have to comply.
While this was great news, it does not provide enough certainty. An alert on FinCEN’s BOI website notes, "In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports." But FinCEN has appealed the ruling and if the courts were to stay the injunction, that could put the reporting and fines back on the table.
Congress needs to act to give small businesses clarity. In addition to delay bills in the House and the Senate, a repeal bill "Repealing Big Brother Overreach Act" introduced in the House by Rep. Warren Davidson, R-Ohio, and in the Senate by Sen. Tommy Tuberville, R-Ala., should be voted on by Congress.
Also, the Trump administration has an opportunity to come out and say that it won’t enforce any fines either – giving more clarity to small businesses headed into the end of the year – and, even better, that Trump’s Treasury will jettison this effort entirely.
Small businesses are not financial criminals; they are the backbone of the economy. The BOI rule nonsense is a perfect example of why Elon Musk and Vivek Ramaswamy are heading the DOGE (Department of Government Efficiency) effort and it should be a top priority for both Congress and the Trump administration as they work to stop saddling productive Americans with rules, regulations, fines and unconstitutional mandates.
