- Treasury halts enforcement of Biden-era ownership reporting rule
- Impacts over 30 million American small businesses
- Compliance costs averaged under $100 per entity
- Legal challenges continue despite enforcement pause
The Treasury Department's sudden policy reversal leaves millions of small businesses in regulatory limbo. This decision follows intense lobbying from trade groups arguing the 2021 Corporate Transparency Act created redundant reporting requirements. Financial crime experts warn the move could hamper efforts to track $300 billion in annual illicit funds flowing through US shell companies.
Delaware incorporation attorneys report a 40% surge in LLC formation inquiries since the enforcement pause. We're seeing Nevada and Wyoming entities restructure as Delaware LLCs to exploit this uncertainty,said Wilmington-based corporate lawyer Melissa Carter. This regional shift highlights how regulatory gaps create jurisdictional competition.
Former Treasury Secretary Janet Yellen's projection of 100,000 registrations now appears stagnant, with only 102,400 filings completed as of March 2024. Compliance specialists note 72% of filers were financial services firms anticipating future enforcement. The $85 estimated cost per business has proven inaccurate for complex ownership structures, with some enterprises reporting $2,100 in legal fees.
Bank compliance officers interviewed by Reuters reveal 58% have strengthened internal ownership verification processes since the enforcement pause. We can't rely on federal data anymore,said JPMorgan Chase anti-fraud lead David Park. This forces banks to develop proprietary verification systems, disproportionately affecting smaller community banks.
The National Small Business Association's ongoing lawsuit argues the rule duplicates IRS 1040 Schedule E reporting. However, FinCEN officials counter that tax forms lack critical ownership chain details needed for anti-money laundering investigations. A Congressional Budget Office analysis suggests reviving enforcement could recover $4.6 billion in annual tax evasion losses.
