The Corporate Transparency Act: A Burden on Small Businesses

The Treasury Department in Washington often gives reassuring names to questionable laws. The Inflation Reduction Act, for instance, raised spending instead of curbing inflation, while the Affordable Care Act increased health care costs by reducing competition.

The Corporate Transparency Act (CTA) is another misleadingly named law. Under the guise of fighting financial crime, it places a broad reporting requirement on small businesses, exempting large corporations. This law targets individuals like neighborhood association volunteers or one-person business owners, forcing them to disclose sensitive information or face fines and criminal charges.

This would be defensible if it were effective. However, the CTA reflects Washington’s habit of gauging success by governmental activity rather than results. President Reagan once said, “The nine most terrifying words in the English language are ‘I’m from the government, and I’m here to help.’” The government often responds to issues by increasing spending and paperwork, as seen in anti-money-laundering efforts.

The Financial Crimes Enforcement Network handles millions of reports yearly but reviews only 5.4% of them. Despite extensive reporting requirements, just 1% of laundered funds are stopped. The CTA, under the Biden administration, treated many small-business owners as suspects, demanding personal information for mere ownership, regardless of evidence.

Trump’s administration tried to shield businesses from these demands, but the CTA’s law remains. Future administrations could reimpose these requirements. To change this, Congress needs to repeal the CTA. The proposed Repealing Big Brother Overreach Act, supported by 193 House members and the National Federation of Independent Business, aims to do so. Though it wasn’t part of the National Defense Authorization Act, there is hope for its inclusion.

Repealing the CTA through the National Defense Authorization Act is fitting, as it’s where Democrats initially enacted it. Small-business owners should focus on their enterprises, not worry about future data demands. Trump has temporarily relieved them from reporting sensitive information. Now, Congress must make this permanent by removing the CTA.

Warren Davidson, a member of the House Financial Services Committee, represents Ohio’s 8th District in Congress.

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