The U.S. Treasury Department, located in Washington, is often linked to legislative actions with misleading names. An example is the $2 trillion Inflation Reduction Act, which aimed to address inflation by increasing taxes and governmental spending. The Affordable Care Act led to greater government involvement in health care, driving costs up due to reduced competition. The Patriot Act expanded government surveillance, purportedly to protect citizens. Similarly, the Corporate Transparency Act misleads by suggesting it makes large corporations accountable. Instead, it imposes extensive federal demands on small businesses under the guise of combatting financial crime.
Intuitively, the law’s name implies an obligation for large companies to unveil ownership details, governmental dealings, and operations, primarily to prevent illegal activities. However, it unexpectedly categorizes small entities like neighborhood associations and sole proprietorships as suspects, mandating them to submit sensitive personal data to authorities. Non-compliance leads to fines and criminal charges. This directive excludes big enterprises, burdening numerous small entities with reporting requirements instead.
The intention behind these requirements might be defensible if they proved effective. Unfortunately, the Corporate Transparency Act exemplifies a tendency in Washington to equate success with government action rather than outcome. As President Ronald Reagan once noted, the government’s presence often exacerbates issues. When problems arise, the immediate policy is to spend more while increasing paperwork, thus allowing politicians to claim decisive action. The anti-money-laundering framework embodies this approach. The Financial Crimes Enforcement Network handles nearly 5 million suspicious activity reports annually, alongside over 21 million currency transaction reports. Despite the volume, only a fraction is scrutinized by law enforcement, and a mere 1 percent of laundered funds are intercepted.
Under the Biden administration, the Corporate Transparency Act’s enforcement regarded small-business owners as potential criminals, compelling them to share personal data with the Financial Crimes Enforcement Network. This obligation persisted even absent evidence of malpractice. Sole proprietors faced yet another federal compliance hurdle. Similarly, neighborhood associations had to navigate additional reporting challenges when leadership changed—a backward process, considering the government should have proven malpractice before requiring private information from citizens.
President Trump’s Treasury Department took protective measures within its limits to safeguard American businesses from these burdensome reporting obligations. However, executive efforts can’t nullify a Congressional statute. The Corporate Transparency Act still stands, allowing any future administration to reinstate these stipulations. President Trump has done his part. It’s Congress’s turn to act by rescinding the Act permanently.
There is a proposed solution. The Repealing Big Brother Overreach Act aims to abolish the Corporate Transparency Act, garnering support from 193 congressional co-sponsors and acknowledgment by the National Federation of Independent Business. Despite its exclusion from the House’s National Defense Authorization Act proceedings, it’s feasible to include the repeal in the forthcoming legislation. Considering almost half of the House supports the repeal, its integration into the National Defense Authorization Act, the original legislative vehicle for the Corporate Transparency Act, seems appropriate.
Small enterprises ought to prioritize customer service, business expansion, and job creation, unburdened by potential administrative demands from future administrations to disclose private details to the government. President Trump has shielded small businesses from unnecessary reporting, yet the responsibility lies with Congress to ensure this safeguard is permanent by abolishing the Corporate Transparency Act.
Warren Davidson serves on the House Financial Services Committee and represents Ohio’s 8th District in Congress.