Commentary: Transparency Act will require more business filings

By Matthew Viohl

In the alphabet soup of federal government agencies, farmers and ranchers are well familiar with agency acronyms such as USDA, BLM, EPA and the IRS.

While we may often prefer to forget the latter of those exists, employers are now learning of a different bureau housed under the U.S. Department of the Treasury—the Financial Crimes Enforcement Network, or FinCEN.

The reason for learning what FinCEN is comes almost exclusively as a result of the Corporate Transparency Act. Signed into law in late 2021, the legislation imposed a new regulation that requires applicable businesses to submit a Beneficial Ownership Information Report, or BOIR, by Jan. 1, 2025.

Per the Treasury Department, roughly 32 million businesses are expected to be liable for filing such a report, including many farms, ranches and agricultural businesses.

Now, I know you’re probably thinking, “I don’t recall anyone from the Treasury Department ever calling me up to let me know about this.” My guess is you’re not alone. In a recent hearing, Treasury Secretary Janet Yellen revealed that fewer than 3 million reports have been filed. That is less than 10% of total expected reports through nearly much of the open filing period.

You are also probably wondering what a report is exactly and whether it applies to you. Let’s start with the first piece. FinCEN is trying to establish those who identify as a “beneficial owner” for a given company. A beneficial owner is anyone who either directly or indirectly exercises substantial control of the company or owns or controls at least 25% of a company’s interests.

Any such person who meets this threshold will be required to submit the following on a BOIR: name, date of birth, address and identifying number, which could either be from a driver’s license, passport or even a unique FinCEN ID. Put all of these together for each beneficial owner and you have an official BOIR ready to file.

Own a family business where ownership is split evenly between four individuals? Then that’s four individuals whose information needs to be collected.

As for which businesses this applies to? The answer is: quite a lot.

The Corporate Transparency Act gives exemptions to 23 specific types of entities, which can be found on the CTA FAQ portal. The most relevant may be the large operating company exemption, which excuses companies with at least 20 full-time employees.

The devil is in the details though, so it is best to go online and examine the requirements and exemptions yourself. FinCEN has a robust webpage, www.fincen.gov, that has answers to many questions, as well as contact details if you’re still unsure about your potential obligations.

You are going to want to figure out your potential liability because of what could happen if you choose to not file a BOIR. Willful failure to submit this report could lead to civil and criminal penalties. This includes fines of up to $10,000 and even jail time.

Secretary Yellen has reiterated that the CTA was not formed for the purpose of going after mom-and-pop shops that forget to file reports. The original intent behind the legislation was to help FinCEN detect, prevent and punish financial crimes carried out by money launderers, including those enabling financial terrorism and other bad actors.

While this is all well and good, a legal requirement remains a legal requirement. The federal government may not intend to go after small businesses, but many feel targeted. Not only that, but many people are rightfully leery of providing even more private data to an agency they may be just hearing about and don’t understand.

What is being done to alter this quickly approaching deadline? Some congressional efforts have begun to try to reverse what Congress did just three years ago. But the prospects of legislative relief seem dim at this point.

However, on the judicial front, the National Small Business Association successfully sued the Treasury Department on behalf of its members. In March, a U.S. District Court ruled that the Corporate Transparency Act was unconstitutional and unfairly burdened small businesses by requesting this personal data. While the Treasury Department is appealing that decision, NSBA’s 60,000 members are no longer required to file a BOIR, at least for now.

This still leaves more than 31 million businesses on the hook for filing a BOIR by the end of the year. While I cannot say for certain if that includes your farm or ranch, my guess is there’s a good chance it does.

A counterpart of mine in Washington, D.C., recently quipped, “The federal government seems intent to make 30 million felons overnight.” Rest assured, that’s not the case.

You’re largely safe from becoming one, unless you happen to be a money launderer. Still, I would urge you to go online and determine your legal obligations so that you can avoid any fines or penalties that could result if you fail to file.

(Matthew Viohl is director of federal policy for the California Farm Bureau. He may be contacted at mviohl@cfbf.com.)