2024 Corporate Transparency Act Demands Compliance from Small Businesses Or 2 Years in Prison

The excuse for a new law, the Corporate Transparency Act (CTA) that went into effect on January 1, 2024

By Lee Phillips, Sovereign Man and Mayer Brown Law Firm

The excuse for a new law, the Corporate Transparency Act (CTA) that went into effect on January 1, 2024, is to help prosecute and deter money laundering and tax fraud. The CTA covers both US and non-US entities conducting business in the United States that may include a corporation, limited liability company, limited partnership, or any other entity created by the filing of a document with a secretary of state or similar office, including, in certain circumstances, limited liability partnerships and business trusts. Many, if not most, businesses are unaware of the new law.

Lawyer Lee Phillips said that CTA requires companies to file reports with the Financial Crimes Enforcement Network (“FinCEN”) and are essentially being investigated for a crime. FinCEN agents carry guns and are the “little brother” of the IRS with the same enforcement ability. Reporting is mandatory. Failure to comply with CTA carries a maximum fine of $500 per day up to $10,000 and criminal penalties, including up to two years in prison.

Simon Black says small businesses are targeted while large, publicly traded companies are specifically exempt from reporting under the CTA. So are hedge funds, banks, and other large financial entities. Curiously, tax-exempt charities are also exempt. He wrote that Goldman Sachs, Black Lives Matter, and Facebook/Meta are exempt while Bob’s Hot Dog Stand is not. One of the big requirements of the CTA is that small business owners must file a new report to the federal government each year to disclose the company’s shareholders.

Hunter Biden most likely isn’t going to jail any time soon despite an obvious track record of fraud and criminality. But if you happen to be a small business owner in the Land of the Free, you are looking at potentially two years in prison if you don’t comply with a new law that just took effect yesterday.

It started nearly five years ago, in the spring of 2019.

Back then, a member of Congress from the state of New York– a career politician with five decades of experience named Carolyn Maloney– introduced a new bill to the House of Representatives called the Corporate Transparency Act, or CTA.

At first her bill didn’t go anywhere.

But the following summer, during the peak Covid insanity of 2020, the CTA was jammed into the nearly 1,500-page National Defense Authorization Act (NDAA), i.e. the military budget that Congress is required to pass each year.

The NDAA (and hence the CTA along with it) were passed on January 1, 2021. And now, three years later, the CTA has formally taken effect.

Now, the whole premise behind the Corporate Transparency Act is the classic boogeyman premise that evil criminals and terrorists use US corporations and LLCs to conduct their illicit activities, so therefore the government wants more rules, regulations, and reporting for US companies.

This is the same simple-minded hysteria that we always hear about cryptocurrency, i.e. criminals and terrorists use Bitcoin, therefore it should be tightly regulated by hapless government bureaucrats.

Obviously, it’s true that criminals can and do use crypto– or US business entities like Delaware LLCs– to commit their crimes.

Criminals also use iPhones, Facebook, Gmail, Dell laptops, JP Morgan Chase bank accounts, Ford F-150 pickup trucks, Amazon gift cards, and Verizon Wireless to commit their crimes.

But in this case, in the infinite wisdom of Congress, it’s business entities that are being singled out for additional scrutiny.

So, because criminals sometimes use US business entities to launder money, every law-abiding US citizen with a completely legitimate business now must jump through all sorts of hoops and reporting requirements.

And if you fail to report, you’re looking at two years in prison.

There are so many things about this that are completely stupid.

First off, the United States legal code already has dozens of anti-money laundering laws and regulations on the books. Seriously, dozens.

Yet clearly if Congress saw the need to pass a NEW anti-money laundering law (the CTA), then it stands to reason that those existing laws are ineffective… and hence should be repealed.

But that’s not how the government operates. They don’t strike off ineffective laws. They just keep piling more laws and rules on top of the old ones, creating a mountain of regulation for small businesses to navigate.

And I’m saying “small business” on purpose because that’s who is specifically targeted by the CTA.

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