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Reporting Personal Information of Business Owners

Reporting Personal Information of Business Owners

Happy New Year from Congress! Overriding President Trump’s veto, on January 1, 2021, Congress passed the Corporate Transparency Act to require reporting personal information of business owners. Millions of small businesses will be required to report the names, birth dates, addresses and driver’s license numbers of their “beneficial owners” (those who own 25% or more of the equity or exercise “substantial control”). The stated purpose of the new law is to combat use of “anonymous shell companies” for money laundering, terrorism and other illegal activities. The reported personal information may also be used for tax and other enforcement purposes. Willful failures to report or submitting inaccurate reports result in $500 per day penalties and up to two years imprisonment. As with most legislation, implementing regulations are required to detail the requirements and performance standards.

Relief. Legislative sledgehammers equally impact legitimate companies with targeted offenders. Some relief from this additional layer of business regulation includes:

  • Companies existing on the effective date of the implementing regulations may defer reporting for up to two years after effective date. Companies created after the regulations effective date will likely be required to report earlier.
  • Taxable entities that employ more than 20 full-time employees in the U.S., annually report more than $5 million in gross receipts to the IRS and have a physical office in the U.S. will be exempt from reporting.
  • Certain regulated entities already subject to significant reporting requirements (political organizations, banks, insurance companies, securities broker and investment advisors, and insurance companies) will be exempt from reporting. However, financial institutions will be subjected to significant operational requirements.

Privatized Enforcement. Whistleblowers will receive 30% of monetary penalties collected in enforcement actions seeking more than $1 million in sanctions. Acting in effect as deputized private enforcers, whistleblower employees and others will be protected by law.