SEMA eNews Vol. 22, No. 43, October 24, 2019

U.S. House Passes Small Business Transparency Bill

By SEMA Washington, D.C., Staff

The U.S. House of Representatives passed the “Corporate Transparency Act of 2019” (H.R. 2513), a bill that would impose new reporting requirements on small businesses in an effort to gather information about the beneficial owners of small companies and prevent bad actors from using shell companies to break the law. The bill defines “beneficial owner” to mean anyone who exercises substantial control over a company, owns at least 25% of a business’ equity interests or receives substantial economic benefits from the business (as determined by implementing regulations). SEMA opposes H.R. 2513, which would impose duplicative and problematic reporting burdens on millions of small businesses in the United States with 20 or fewer employees and $5 million or less in gross receipts or sales. SEMA and business groups sent Congress a letter in opposition to the legislation.  

The U.S. Department of Treasury’s Financial Crimes Enforcement Networks (FinCEN) published a rulemaking in 2018, which required financial institutions to collect the beneficial ownership information of legal entities with which they conduct commerce. H.R. 2513 would shift the reporting requirements of this rule from large banks to small businesses, requiring them to register with FinCEN upon incorporation and file annual reports with the agency for the life of the business. Failure to comply with these reporting requirements would be a federal crime with civil penalties of up to $10,000 and criminal penalties of up to three years in prison.  

For more information, contact Eric Snyder at erics@sema.org.

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