by Sharelle Burt
May 31, 2024
The Treasurer’s Corporate Transparency Act now requires over 32 million small businesses across the country to report private information regarding the “beneficial owner.”
Boston-based advocacy groups and Black women business owners filed a lawsuit against the federal government over what is described as invasive financial requirements in legislation.
The Treasurer’s Corporate Transparency Act now requires over 32 million small businesses across the country to report private information regarding the “beneficial owner” to the federal government. Names, date of birth, address, and government ID all need to be included.
The suit, filed on behalf of three Massachusetts-based Black women business owners, the Black Economic Council of Massachusetts (BECMA) and the African Community Economic Development of New England (ACEDONE), alleges that by doing this, business owners of color would sustain another burden on top of several disproportionate hurdles, along with putting immigrant business owners at risk. The suit also describes the term “beneficial owner” as too vague, stating it can refer to anyone with ownership or control of the business.
Lawsuit filers are asking for a judge to rule the law as unconstitutional. “This lawsuit is our way of standing up for the business owners that we support and the community we represent,” Abdul Hussein, ACEDONE’s CEO, said.
According to ICLG, the suit highlights investment concerns by arguing the legislation may discourage investment in small businesses. If business owners don’t adhere to the provisions of the measure, owners face potential fines and up to two years behind bars for “overly burdensome, vague and confusing requirements.” The bill could also deter potential investors from supporting small businesses.
One of the plaintiffs’ biggest concerns is that one of the provisions allows the Financial Crimes Enforcement Network, which collects the data, to share investors’ information with other entities like law enforcement agencies and foreign governments. Michael Kippins, litigation fellow at Lawyers for Civil Rights, says this just adds extra stress to targeted business owners. “People of color, immigrants, non-English speakers, and low-income individuals who own small businesses already face significant burdens in creating and running those businesses,” Kippins said.
“Now the federal government threatens them with fines and prison time.”
Prior to the new act, business owners were required to file basic information about the business and owners with a state agency like the Secretary of the Commonwealth of Massachusetts. However, new provisions, according to the suit, are “overreaching” with the more intrusive requirements with threats of criminal prosecution.
However, the Treasury Department doesn’t see it that way. In a statement, a spokesperson said the department is certain the new transparency act “plays a vital role in protecting the U.S. financial system, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering.” Regardless of what the department feels, Nicole Obi, president and CEO of BECMA, believes it’s a priority to fight back. “BECMA’s membership includes hundreds of black-owned small businesses that could be unfairly targeted by the federal government under this new law,” Obi said in a statement.
“Our mission is to drive economic equity for Black-owned businesses and communities. We have to challenge a law that threatens the viability of so many diverse businesses across the state.”
The Treasury spokesperson encouraged businesses to seek guidance from its website for information on filing requirements and deadlines.
