New federal regulation could catch business owners off guard

A federal regulation that goes into effect in January may take many business owners, including farmers and ranchers, by surprise. 

The 2021 Corporate Transparency Act (CTA) mandates that millions of businesses, including farms and ranches, file a report on all beneficial owners with at least 25% ownership of the company. Businesses must submit a Beneficial Ownership Information (BOI) report by Jan. 1, 2025 to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). 

The act is designed to curb illicit finance by requiring companies doing business in the U.S. to report information about the individuals who ultimately own or control them, according to FinCEN’s website. But it has sparked controversy, pushback and legal action. 

“For too long, criminals have hidden behind anonymous shell companies to launder the proceeds of illicit activities like corruption and human trafficking through the U.S. economy,” U.S. Treasury Secretary Janet Yellen said in a December 2023 video. “This dirty money flowing in from all over the world undermines fair business competition and poses risks to our country’s economic and national security.”

The act requires companies registered to do business in the U.S. before Jan. 1, 2024 to file information including name, date of birth, address and an identifying document such as a U.S. driver’s license or passport. Newly created companies must submit the information 90 days after receiving notice of effective business registration. 

The Treasury Department estimated 32 million businesses would be required to file a report and began accepting filings on Jan. 1 of this year. Yellen testified at a July hearing that just 2.7 million filings had been received. 

“I think every small business in America is likely to be surprised,” said Dustin Sherer, Farm Bureau director of government affairs. “(On) Jan. 1, 2025, you’re going to likely have tens of millions of businesses that are felons overnight as a result of this law.”

Lawsuits challenging the CTA have been filed in six states. In March, a U.S. District Court ruled that the act was unconstitutional and unfairly burdened small businesses — a decision the Treasury Department is appealing. 

The act also contains 23 exemptions for businesses already heavily regulated or for which the collection of BOI data doesn’t serve the public interest, including banks, insurance companies, public utilities and large operating companies — those with more than 20 full-time employees and more than $5 million in annual sales.

It all adds up to a confusing landscape that could affect growers and processors.

“More and more people are starting to talk about it as we get closer to the end-of-the-year deadline, but there’s still a lot of folks out there who either don’t know or don’t want to do it in hopes that it is solved for them before the end of the year,” Sherer said. 

The prospect of legislative relief looks dim, Sherer said, with a definitive legal outcome by the end of the year unlikely. Therefore, business owners would be wise to check with certified public accountants and/or lawyers to find out if their businesses are required to file, he said.

“Talk with folks to make sure you’re prepared,” he said. “The oral arguments for the appeals case are set for the last week of September. Based on that timeline,  it would have to be a prettily hastily issued decision if we were to get one before the end of the calendar year. So I would encourage folks to pay attention to that and a couple of the other lawsuits that have been filed in district courts in other parts of the country.”

Sherer said he’s heard from Farm Bureau members in several states who don’t know if their businesses are considered reporting companies. 

“I think it’s troubling to a lot of folks who don’t understand why, if they haven’t done anything wrong, they have to register their personal information with the Financial Crimes Enforcement Network, and why this type of information that heretofore has only been required at a state level for a business entity registration now has to be filed with the federal government,” he said. “It’s both confusing and concerning among our members.”

Melinda Waldrop, Managing Editor