Stricter Disclosure Requirements on the Horizon for Businesses

H.R. 2513, the “Corporate Transparency Act of 2019” would require applicants who form a corporation or LLC under State or Tribal laws to file a list of beneficial owners with the U.S. Dept. of Treasury’s Financial Crimes Enforcement Network (FinCEN).  Existing LLCs and corporations would be required to begin filing this information annually *no sooner than 2 years after the bill becomes law*, pursuant to a rulemaking by the Secretary of the Treasury.  The information collected would be:  presentation of a passport with photograph, date of birth, and unique identifying information like name/address for each beneficial owner.

In order to be exempt from the filing requirements, an LLC would have to meet ALL three criteria:

  1. Over 20 employees in the United States
  2. Over $5 million in receipts
  3. Physical office location where business is conducted in the United States.

Most TIA members would not meet all three thresholds, and therefore would not be exempt from the filing requirement.

The goal of the legislation is to close loopholes in LLC and corporate formation, which the bill notes is easier than opening a bank account in some states.  This information would be made available to federal, state, local, or tribal law enforcement upon request, as needed to reduce fraudulence, money laundering, and the like.

The bill formalizes and expands on anti-money laundering authorities already held by Treasury.  An example of these authorities already being used are Geographic Targeting Orders (GTOs) for senders and recipients of cash-purchased transactions to and from Colombia, or the 2018 requirement that title insurance companies must disclose the identities of LLC purchasers spending certain amounts of money on real estate purchases in specific jurisdictions.

The bill has a broad coalition of supporters in the private sector, who want to tighten corporate regulations to reduce trafficking, money laundering, and the like.  Human Rights Watch, Unions, a lot of government watchdog groups, and others are supportive.  Here is a letter they sent to the House sponsors.  On the other side, this is an issue being monitored and opposed by the Heritage Foundation and FreedomWorks, who are conservative and libertarian think tanks and advocacy groups in Washington, DC.

On June 11, 2019, the House Financial Services Committee reported out of Committee, H.R. 2513, the “Corporate Transparency Act of 2019” on a vote of 43-16 with 10 Members of the Republican party joining all 33 Democrats in support.

There is a companion bill in the Senate, sponsored by Ron Wyden of Oregon, that has been referred to the Banking Committee but not marked up.  This legislation passed the Republican-controlled House in the last Congress but was not taken up by the Senate.

TIA’s Operations Committee is examining these issues and providing feedback to TIA staff. Please let us know what the potential impact to your business might be. Contact or 703.299.5700 with your feedback.

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