Quickly making its way through the legislative process, the House of Representatives passed a bill aiming to give small-business owners much-needed certainty and relief from beneficial ownership information reporting.
On Monday, Feb. 10, the House passed HR736, the Protect Small Business from Excessive Paperwork Act. The one-sentence bill simply postpones the beneficial ownership information reporting deadline for most companies to Jan. 1, 2026.
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Formally introduced on Jan. 24, the Protect Small Business from Excessive Paperwork Act is already halfway through Congress. Introduced by Rep. Zach Nunn, R-Iowa, the bill drew bipartisan support from Kansas Rep. Sharice Davids and North Carolina Rep. Don Davis, both Democrats. HR736 breezed through the House with a 408-0 vote.
In effect since last January, the Corporate Transparency Act aimed to combat terrorism and criminal organizations by going after the shell companies they use to funnel in money. The law requires small businesses to file what is called a beneficial ownership information report to identify the people behind the company.
Initially, small businesses formed before Jan. 1, 2024, were required to file a report by Jan. 1, 2025. Businesses created between Jan. 1, 2024, and Jan. 1, 2025, had a 90-day window to file. Any companies formed after this Jan. 1 would have had 30 days to submit a report.
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More information about the Corporate Transparency Act and its beneficial ownership information reporting requirements can be found here.
However, a series of court orders ultimately led to the Corporate Transparency Act being put on hold. As of Tuesday, Feb. 11, companies were not required to file a beneficial ownership information report. The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), the agency enforcing the law, said businesses can still file voluntarily at FinCEN.gov/boi.
Rep. Nunn said most business owners do not even know about FinCEN, thinking notices from the agency are a scam from a made-up agency. During the vote, Rep. French Hill, R-Ark., said that although nearly 33 million businesses are required to file a beneficial ownership information report, only 9 million have done so, less than a third.
“Although this law was enacted with good intentions, Treasury’s promulgation and implementation of the new reporting regime has been overly complex and particularly burdensome,” Hill said.
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On Monday, Feb. 10, both Democrats and Republicans expressed support for HR736 and the need to give small businesses more time to file a beneficial ownership information report. However, Democrats defended the Corporate Transparency Act, while Republicans criticized the new law.
“HR736 rightfully delays the beneficial ownership reporting rule one year to 2026, giving the Trump administration and the courts time to assess the proper path forward for small businesses,” said Rep. Daniel Meuser, R-Pa..
Attempts to repeal Corporate Transparency Act
While HR736 is making its way through Congress, another bill aims to get rid of the Corporate Transparency Act and its beneficial ownership information reporting requirement for good.
HR125 and S100, the Repealing Big Brother Overreach Act, would repeal the Corporate Transparency Act, effectively wiping beneficial ownership information reporting from the books. The bills were introduced by Sen. Tommy Tuberville, R-Ala., and Rep. Warren Davidson, R-Ohio.
Although the bills have received significantly more co-sponsors than the Protect Small Business from Excessive Paperwork Act, there is no bipartisan support behind them. All 98 co-sponsors for the House version and all 25 co-sponsors in the Senate are Republicans.
Despite being introduced before HR736, the Repealing Big Brother Overreach Act remains in committee in both chambers of Congress.
Court challenges
Several court orders have taken small-business owners off the hook to file a beneficial ownership information report, but they have also left companies wildly confused with a lack of certainty.
There are several lawsuits challenging the Corporate Transparency Act, but two in Texas have put the law on hold. However, conflicting court rulings left business owners confused in the days and weeks before and after the Jan. 1 deadline:
Dec. 3, 2024: A nationwide injunction was ordered in the Texas Top Cop Shop case, taking companies off the hook to file a beneficial ownership information report by Jan. 1.
Dec. 23, 2024: A Fifth Circuit Court of Appeals motions panel reversed the injunction, putting the BOI requirement back into play.
Dec. 26, 2024: The Fifth Circuit merits panel reversed the reversal, killing BOI again.
Jan. 7: A second nationwide injunction was ordered in the Samantha Smith case.
Jan. 23: The Supreme Court lifted the Texas Top Cop injunction but kept the Smith injunction intact, maintaining BOI reporting as optional, not required.
During the House vote, Hill referred to the multiple court orders when making the case to delay beneficial ownership information reporting.
“Recent federal court actions on this confusing and complex rule have just added to the confusion that many of our members are hearing about from their constituents in their districts,” he said.
Despite overwhelming support among Republicans to kill the Corporate Transparency Act, the Trump administration’s position on the issue so far is to keep the law in place.
On Wednesday, Feb. 5, the Department of Justice asked the court in the Smith case to lift the injunction, which would revive beneficial ownership information reporting.
“The government is likely to succeed on the merits because Congress acted well within its enumerated powers when it enacted the (Corporate Transparency Act),” Acting United States Attorney Abe McGlothin Jr. states in court documents. “Congress has broad power under the Commerce Clause not only to regulate interstate commerce directly but also to regulate purely local activity as part of a broader regulatory scheme. It exercised that power to require basic disclosure of beneficial ownership from certain entities with the ability and propensity to engage in commercial activities. Congress determined that the CTA would enable the federal government to better combat financial crime, and this Court had no basis to disregard that legislative judgment.”
The federal government noted that if the injunction is lifted, companies will have 30 days to file a beneficial ownership information report. Within those 30 days, FinCEN will consider modifying the Corporate Transparency Act “to alleviate the burden on low-risk entities.”
As of Wednesday, Feb. 11, the district court had not ruled on the motion to lift the injunction. Plaintiffs have until Friday, Feb. 14, to file their response in opposition. A decision is expected shortly after.
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