Small businesses across the United States are facing a significant new compliance challenge under the New Treasury Reporting Rule, as part of the Corporate Transparency Act (CTA). With potential fines exceeding $10,000, the requirement to report beneficial ownership information (BOI) to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has sparked concern among business owners. Despite the looming deadline of January 1, 2025, compliance rates remain alarmingly low, leaving millions at risk of penalties.
Understanding the Reporting Requirement
The CTA, enacted in 2021, aims to combat illicit financial activities such as money laundering and terrorism financing by requiring businesses to disclose information about individuals who own or control at least 25% of the company. This includes personal details like names, addresses, and identification numbers. The law applies to approximately 32.6 million businesses, including corporations and limited liability companies, with exceptions for entities meeting certain criteria, such as large firms with over $5 million in gross sales and 20 or more full-time employees.
Treasury Secretary Janet Yellen emphasized the importance of the New Treasury Reporting Rule, stating that corporate anonymity enables criminal activities, including corruption and drug trafficking. However, compliance appears to be lagging. As of early December, FinCEN had received only 9.5 million filings, representing about 30% of the estimated total, according to data shared by Rep. French Hill, a critic of the act.
Businesses that miss the deadline face steep penalties: up to $591 in civil fines per day and $10,000 in criminal fines, along with possible imprisonment for up to two years. Charlie Fitzgerald III, a financial planner, warned that such fines could cripple small businesses already struggling with economic pressures.
Compliance Challenges and Enforcement
Despite government efforts to promote awareness, many businesses remain unaware of the reporting requirement. FinCEN reported processing around one million filings weekly as the deadline approaches, but trade groups like the S-Corporation Association of America describe the national compliance outlook as “bleak.” The association warned in October that millions of business owners risk becoming “de facto felons” due to non-compliance by 2025.
To address concerns, Treasury officials have clarified that penalties under the New Treasury Reporting Rule will only be imposed for willful violations of the law. Businesses that correct errors or omissions within 90 days of their filing deadline may avoid penalties. However, the scope of enforcement remains uncertain. A recent federal court injunction temporarily blocked the Treasury Department from enforcing the rule while reviewing its constitutionality, adding further confusion to the compliance landscape.
Moving Forward
Despite the enforcement pause, experts urge businesses to comply with the BOI filing requirements to avoid future penalties. “The deadline itself hasn’t changed, only enforcement has,” said Erica Hanichak of the Financial Accountability and Corporate Transparency Coalition. Attorneys suggest the government may appeal the injunction, potentially reinstating enforcement.
FinCEN has also reassured business owners that the agency aims to promote compliance rather than issue punitive measures. “This is a new requirement, and our goal is not ‘gotcha enforcement,'” FinCEN stated in a public FAQ.
As the deadline approaches, the New Treasury Reporting Rule underscores the growing emphasis on financial transparency. For small businesses, proactive compliance is essential to avoid significant financial and legal repercussions while contributing to a broader effort to curtail illicit financial activities.
