The Republican leader of the House Financial Services Committee, Patrick McHenry (NC-10), issued the following statement on the bipartisan beneficial ownership conference agreement included in the Fiscal Year 2021 National Defense Authorization Act (NDAA) to provide the strongest protections in the history of small businesses’ beneficial ownership data collection:
“The Corporate Transparency Act passed by the House last year would have hurt our small businesses. I won concessions to protect small businesses’ information just like tax return information and secured necessary transparency and accountability provisions. The safeguards included in the agreement ensure struggling main street businesses won’t face another new hurdle—this time at the hands of the federal government. I applaud the work of Chairman Crapo, Congressman Luetkemeyer, and Congresswoman Maloney to ensure this bill accomplishes the goal of targeting bad actors, not law-abiding business owners.”
Background on the beneficial ownership conference agreement:
Limits the Burden on Small Businesses
- The agreement protects our nation’s small businesses, which employ 47.5 percent of the U.S. workforce, by preventing duplicative, burdensome, and costly reporting requirements for beneficial ownership data.
- The agreement rescinds the current beneficial ownership reporting regime—that is costly and burdensome to small businesses—and prohibits any future rule from imposing duplicative reporting requirements on America’s small businesses.
- While the agreement removes any prospect of a duplicative reporting regime, it also makes clear that any new beneficial ownership reporting requirements must minimize the burden and the compliance costs on small businesses.
- Requires the Secretary of Treasury to testify annually for 5 years on steps taken in the new regulation to eliminate duplicative requirements on small businesses and ways to continue minimizing compliance costs.
Protects the Privacy of our Small Businesses
- Small businesses’ information will be protected just like an individual’s tax return information.
- The agreement provides the strongest protections in the history of small businesses’ beneficial ownership data. The protections are extended in 6 critical ways:
Agency Head Certification
- Requires an Agency head or designee to certify an authorized investigations or law enforcement, national security or intelligence activity that necessitates access to the database.
- Requires an Agency head to make a semi-annual certification to the Secretary of the Treasury that protocols for accessing small business ownership data ensure maximum protection of this critically important information.
Strong Protections for Accessing Small Business Ownership Data
- Requires state, local and tribal law enforcement officials who need access to ownership data to obtain approval of their request from the court system in the local jurisdiction.
- The Secretary may only disclose beneficial ownership information to a law enforcement or national security official who is directly engaged in the investigation.
Secure Storage of Small Business Data
- Requires agencies to establish and maintain a secure system to store beneficial ownership information provided directly by the Secretary of the Treasury.
Severe Penalties for Misuse of Small Business Data
- Specifies that violation of appropriate protocols, including unauthorized disclosure or use, is subject to criminal and civil penalties (up to five years in prison and $250,000 fine).
Provides Much Needed Oversight of Beneficial Ownership Collection
- The bill enhances oversight of the collection and use of beneficial ownership information to ensure that small businesses’ data is protected against misuse and unlawful exposure.
Ensures Agencies are Acting in Good Faith
- Requires each agency to establish and maintain a permanent, auditable system of records describing each request, how information is used, and how it is secured.
- Requires agencies to furnish a report to the Secretary describing the procedures to ensure the confidentiality of the beneficial ownership information provided directly by the Secretary of the Treasury.
Annual Public Testimony
- Requires the Director of FinCEN, who is responsible for maintaining the small business data, to testify annually to Congress on its efforts to safeguard information under the statute.
Additional Oversight and Audits
- Requires GAO to audit the procedures and safeguards established by Treasury to determine whether beneficial ownership information is being used appropriately.
- Requires Treasury to conduct an annual audit of agencies’ adherence to protocols to ensure that agencies are requesting and using beneficial ownership information appropriately.
- Requires an annual report by the Secretary on the total number of court authorized requests received by the Secretary to access the database. The report will detail the total requests approved and rejected and summary of justification for the action.