Before going on holiday break, the United States House of Representatives passed HR 5119, the Protect Small Business and Prevent Illicit Financial Activity Act, by a vote of 420-1.

The bill can be found at https://www.congress.gov/bill/118th-congress/house-bill/5119/text.

The summary of the bill provided by the Congressional Research Service states that the bill would do the following:

This bill revises the requirements for small U.S. companies to report certain beneficial ownership information that take effect on January 1, 2024. Beneficial ownership information includes the identity of an individual behind a corporate entity.

The bill extends the deadline for companies to report ownership information to the Department of the Treasury's Financial Crimes Enforcement Network (FinCEN). Specifically, existing companies must file their initial ownership report within two years (current regulations require the report within one year). New companies must file their initial ownership report within 90 days (current regulations require the report within 30 days). Companies must report updates or changes in ownership within 90 days (current regulations require companies to report such changes within 30 days). [https://www.congress.gov/bill/118th-congress/house-bill/5119]

What Changes (and Doesn’t) if the Bill Becomes Law as Is

Below are summarized changes to various due dates if the bill becomes law.

Changes to Initial Filing Deadlines

The bill would make the following changes to the initial filing deadlines under the Corporate Transparency Act:

• The initial filing date for entities in existence before January 1, 2024 would be pushed back to January 1, 2026, two years after the effective date of the final rule for reporting. This is one year later than under FinCEN's current final rule.

• The initial filing date for entities formed during 2024 would be 90 days after the entity’s formation. This is the same as under FinCEN's current final rule.

• The initial filing date for entities formed after 2024 would be 90 days after the entity’s formation. This is 60 days later than would have been required under FinCEN's current final rule. [31 USC §5336(b)(1)(B) and (C) as revised]

Changes to Due Date for Receipt of Updated Reports

The bill would also change the due date for receipt of updated reports. The report would now be required to be filed no later than 90 days after there is a change with respect to any information provided in the report. This is 60 days longer than the 30 days provided under the current FinCEN regulation. [31 USC §5336(b)(1)(D) as revised]

No changes are made in the bill to the final rule’s requirements for filing corrected reports, so those would appear to still be required to be filed within 30 days of the date when the entity becomes aware or should have become aware of errors in the current report.  As well, such corrections also must be made within 90 days of the date the incorrect information was filed with FinCEN or penalties may be assessed for that initial incorrect filing.

The Mysterious New 31 USC §5336(b)(1)(H)

The bill adds a new provision at the end of 31 USC §5336(b)(1) that reads as follows:

(H) UNABLE TO OBTAIN.—FinCEN may not by rule, guidance, or otherwise, permit a reporting company from submitting a report relating to the inability of the reporting company to obtain or identify information in the alternative to submitting a report required under this subsection. [IRC §5336(b)(1)(H) proposed to be added by HR 5119]

To this author, it is not clear that the sentence is grammatically correct, nor is it clear what the House is attempting to do with this provision. At best, I can determine that the provision deals with issues that may arise if an entity claims it is unable to obtain the information necessary to prepare the report. However, it is not clear if the intent was to offer relief or to prevent FinCEN from providing for any such relief. As written, the latter appears more likely.

Not Clear When or If the Senate Will Act

At this point, we only have a bill that has passed one chamber of Congress. It’s not clear when or if the Senate will take up this bill and whether the Senate will want to make changes or clarifications to the bill.

Even if this bill becomes law, the first initial reports would still be required by late March of 2024 for entities formed early in 2024, as the due date for those reports are not changed by this bill as currently drafted.