The U.S. Senate is considering a legislative amendment imposing onerous new financial reporting requirements on an estimated five million small businesses.

The amendment to this year’s Defense Authorization Act mirrors the Corporate Transparency Act of 2019 that passed the U.S. House last fall.

The House earlier this week attached that legislation to the must-pass defense spending measure.

The amendment requires companies to annually report the personal information of their owners to the Financial Crimes Enforcement Network
at the Department of Treasury, or face large fines and multi-year jail sentences.

It applies only to newly formed corporations and LLCs and existing corporations and LLCs with $5 million or less in revenues, 20 or fewer employees, and a physical presence in the U.S.

Failure to comply would be a federal crime with civil penalties up to $10,000 and criminal penalties of up to three years in prison.

The Treasury Department must retain the information for the life of the business plus five years.

Regulatory Costs

The amendment also allows broad access to the data for federal, state, local, or tribal law enforcement agencies without obtaining a subpoena.

An National Federation of Independent Business study found that small businesses will face $5.7 billion in new regulatory costs and an additional 131.7 million hours of paperwork if the legislation is signed into law.

"Small businesses on America’s Main Streets are fighting to survive and recover amid the COVID-19 pandemic," NFIB said in a statement.

"This amendment ... would saddle America’s smallest businesses with 131.7 million new paperwork hours at a cost of $5.7 billion, at the same time treating small business owners as criminals, threatening them with jail time and oppressive fines for failure to provide completed or updated paperwork.

"Now is not the time to bury amendments that shoulder our country’s small businesses, which account for half of our U.S. economy and nearly half of jobs, with yet another onerous regulation.

"To make matters worse, this amendment also puts their personally identifiable information at serious risk."

Connecticut small business leaders are urged to contact senators Richard Blumenthal and Chris Murphy and urge both to support the state's smaller employers and vote against this costly amendment.