The U.S. Corporate Transparency Act (CTA), which was enacted in January 2021, came into effect on January 1, 2024, when many companies in the United States were required to report information about their beneficial owners, i.e., the individuals who ultimately own or control the company, to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.
According to MAGA Congressman Patrick McHenry (R-NC), Chairman of the House Financial Committee, the intent of the CTA is to prevent “bad actors including China, Russia and Iran, from using the U.S. financial system for illicit purposes.”
It established a new beneficial ownership information (BOI) “reporting regime” which was designed to weed out the bad actors and their shell companies while protecting the privacy rights of law-abiding small businesses. The financial information imported into the new reporting regime is to be protected “just like tax returns,” said McHenry.
Six weeks after the bill when into effect, McHenry complained about the new reporting regime at a House Financial Committee meeting and in front of Treasury Under Secretary Brian F. Nelson and FinCEN Director Andrea Gacki.
#WATCH: Chairman @PatrickMcHenry at today's hearing:
— Financial Services GOP (@FinancialCmte) February 14, 2024
"Until FinCEN can show Congress it can do its current job and appropriately use its existing authorities, I’m skeptical of providing greater authorities and resources."
Read more đź”—https://t.co/UiWlMZd3ep
📺 Watch 👇 pic.twitter.com/0OQjFyzQK3
At the meeting on Wednesday, McHenry claimed that the Biden administration has failed to execute Congress’s intent, saying: “It has added unnecessary complexity and confusion to the reporting regime.” McHenry added: “The Biden administration has transformed what was a simple and direct program into Frankenstein’s monster of complexity.”
McHenry also claimed that FinCEN has “failed to educate small business or protect their sensitive information” by creating a reporting regime “that harms American small business” and “leaves our national security at risk.”
FinCEN Director Gacki defended her bureau and reported that representatives are constantly engaged in webinars, meetings, and speaking events to educate and raise awareness about BOI reporting requirements, and have published a small entity compliance guide available in 11 languages. Gacki said: “Our new Beneficial Ownership Contact Center is actively fielding inquires and providing additional guidance.”
Gacki reported that FinCEN is also promoting BOI reporting education with other government agencies including the Internal Revenue Service (IRS) which prompts corporate taxpayers to report BOI when they apply for an Employer Identification Number (EIN).
Gacki also applauded her team for producing a BOI form that can be filled out in about 20 minutes “and without the help of an attorney, accountant, or other advisor.” Gacki’s full statement is here.
Instead of adhering to the bipartisan agreement in the Corporate Transparency Act, the Biden Administration has transformed what was a simple and direct program into Frankenstein’s monster of complexity.
— Patrick McHenry (@PatrickMcHenry) February 15, 2024
When Congress gives agencies an inch, they don’t get to take a mile. https://t.co/DN8JmSKss7
While Gacki said “We look forward to continuing to work with Congress,” McHenry said “I’m skeptical of providing greater authorities and resources” to the agency.
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