Small Business Rundown
Small Business Rundown
Ep. 92: What To Know About BOI Reporting
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Beneficial Ownership Information (BOI) reporting is still a significant threat for small businesses. NFIB member Nancy Marr explains the costs and burden of the filing process. U.S. Representative Brad Finstad discusses the work Congress is doing, and NFIB Director of Federal Government Relations Josh McLeod provides a legislative update and urges small business owners to push for the repeal of BOI and for an unnecessary database of small business owners’ personal data to be destroyed.
Take action: Repeal Beneficial Ownership Reporting Requirements
Learn more: NFIB.com/ProtectPrivacy
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And just don't sit this one out, because I always tell people you're either at the table or on the table. And this is an issue that we need to be at the table making sure our voices are heard as small business owners across this country.
SPEAKER_03The Small Business Rundown is the official podcast of the National Federation of Independent Business, the member-driven voice of small business. Every two weeks, a new episode offers resources for small business owners and information on relevant laws and regulations. NFIB and our members advocate to keep U.S. small businesses strong and independent. Washington, D.C., all 50 states and the nation's courts.
SPEAKER_01This is a small business rundown. I'm Adam Temple, NFIB Senior Vice President of Advocacy, and today we are talking about repealing beneficial ownership information reporting. Currently, U.S. small businesses do not have to file, but that could change at any time unless it's repealed. Joining me to discuss the challenges in the filing process is small business owner Nancy Maher of Prime Housing Group in Michigan. U.S. Representative Brad Finstead will discuss the status of the issue in Congress, and NFIB's Director of Federal Government Relations, Josh McLeod, will explain how small business owners can take action. So first we'll start with Nancy. Nancy, thanks for joining us today.
SPEAKER_00Thanks for having me.
SPEAKER_01So Nancy, can you talk to us a little bit about your business, what type of business it is, and what your experience has been with this beneficial ownership reporting?
SPEAKER_00Sure. We own and manage about 242 apartment homes in the Greater Lansing area. We're a small business, we have less than 10 employees. We are owners on site. I'm a second generation owner. I've been doing this for almost 30 years, and I do it all, right? And that's the way small business works. Um, office, maintenance, HR, payroll, hiring, firing, project management, materials, procurement, leasing, legal contracts. Legal stuff doesn't faze me. I'm always trying to figure out how to work our way through a solution without having to call our attorney because we all know that our attorneys are expensive if they're good. So I'm a constant learner, problem solver. I process our business taxes. Our state director is floored every time I tell her that. But I like numbers. Income minus expenses, a little bit of depreciation, right? So I take care of our payroll filings. So beneficial ownership filing, it shouldn't have phased me. Our ownership is very simple. We have 16 LLCs, but the percentages for all of them are the same. They're really simple. They should have been really simple. So I should have been able to do it myself. I went on the this would have been a couple years ago. I went on the beneficial ownership website and thought, okay, let's get this done. It was so confusing. I consider myself to be a reasonably smart person. And it was it was really confusing. I was really concerned about making an error, and I knew there was work to overturn the beneficial ownership requirement, but there was also a deadline that was looming with like the threat of penalties. So I finally had to decide, okay, I'm gonna turn this over to our attorney and just have them file the paperwork. And I did not realize how expensive it was gonna be. Like I guess if I found it to be confusing, maybe they didn't find it to be confusing, but maybe it was too much of a process for something for a company that's so simply organized. So it was $400 per LLC times 16 LLCs plus some interoffice email stuff to the tune of $7,01 to file our beneficial ownership paperwork. And I my mind was blown. That's not reduction of paperwork. That's not something that a small business owner really wants to have to incur. Here's the troubling part too. They already know what our percentage makeup is. I know that because I do our taxes every year. So when you do the K1, they know that information. They have your name, your address, your social number, your percentage of the business. There's about two and a half pages worth of questions at the beginning of an IRS filing on the 1065 that has questions about foreign ownership and so forth. They know the answer to those questions. They know at the state level what the organization of your company is because you have to file that. So all that is searchable. There's LLC searchable databases. I've used it, kind of curious as to who owns whatever company. So they already have that information. That information already exists. So I was doing some research trying to figure out what the original intent of the beneficial ownership database was. And the search told me that it was to stop bad actors from hiding money to fake shell companies. And by forcing businesses to reveal their true human owners, it aims to help law enforcement fight talks, fraud, money laundering, and terrorism. Right? But here's the thing I'm a really big fan of the Constitution. Really big fan of the Constitution. And I know that the Fourthman Amendment protects us against unreasonable government search and seizures, right? So if the government's an entity wants to find out more information, they have to get a search warrant based on probable cause. It has to be signed by a judge, and it has to be really specific on what's being searched. It's my understanding that the beneficial ownership database is just there. And anybody can search it without having probable cause or a search warrant signed by a judge. So in the back of my mind, I'm sitting there thinking to myself, well, what are you looking for? Who's going to have access to this? And you already have access to this, right? Go through the process, go through the process dictated by the Fourth Amendment and get the information yourself. I want them to be able to research tax fraud money laundering and terrorism, but it's a process laid out by the Constitution. They should be following it. So that's sort of my snapshot of beneficial ownership. And the fact that that database is still sitting out there is concerning, right? Who hasn't gotten day notice of a data breach? Whatever company has had a data breach. Oh, yeah, again, you know, that sort of thing. So it's the whole thing is really it's been disconcerting beginning to end. So that's sort of my take on beneficial ownership.
SPEAKER_01Yeah, and it's a story that we hear often. One of the points that that gets made is unlike Nancy Maher, who has 16 LLCs and takes the time to pay $7,000 to a lawyer to comply with the law, the fraudsters, the money launderers, the drug dealers, does anybody think that they're really going to do the same that a law-abiding small business owner is going to do?
SPEAKER_00Exactly. So you're causing a whole bunch of work, non-income producing work, as we small business owners like to call it, because it's not helping my cause. And I I just I feel like they have the information out there. They just have to do a little bit more research to get to it. And if it's important, then they'll follow the process. I think the process is important.
SPEAKER_01Yeah, absolutely. And Nancy, you alluded to getting mailers about data breaches, and that that's a lot of private information. I don't know about your filing specifically, but it's not just the business owner, it's a lot of the folks that have management interests in the business. So it's a whole lot of folks' information that's being turned over to FINCEN for this government database. So what concerns do you have about that private information being stored in yet another government database?
SPEAKER_00Well, I have the concern about potential data breaches. I have the concern about people without the authority to look at that information, looking at that information. I have a concern that there is a process in place, like I said, with the Fourth Amendment, where there has to be a search warrant signed by a judge. There has to be a process that provides us protection and they're not following that. But my biggest question is who can look at it? Who are the people? Do you know the answer to that question? Who are the people that can look at the beneficial ownership database and look at all that information without a search warrant?
SPEAKER_01Yeah, there's a list of folks that that can. I don't have it off the top of my head, but it is disconcerting the number of officials and where they are in their capacity as law enforcement officials or lack thereof and their ability to get to the database.
SPEAKER_00Right. And and there's certain protections that we expect as US citizens. And I don't think that we should give that up. Like I said, I'm a really big fan of the Constitution. I think that there were certain guidelines that were set down in place that have lasted us a long time and have served very important purposes. And I think we should continue to follow that.
SPEAKER_01Absolutely. So I guess before we close, I I know you need to get back to your business, but whether it's Congress or the administration, what do you want to see done on this?
SPEAKER_00Well, I think that the fact that they are no longer requiring domestic entities to file it is great, but I think it needs to be permanent. And I think that either they get rid of the database or they apply the same rules of the Fourth Amendment to how the database can be searched. I I believe that you can't just random people in the government can't just look at my our IRS statements. Maybe I'm naive, maybe they can. But I feel like when we took history class, when we took government class, I felt like there were certain protections that were built into the way that our government is set up, and I really I expect those protections to be there. And so I expect those protections to be applied to this type of information as well.
SPEAKER_01Very reasonable expectation. Before we go, Nancy, anything else you'd like to close with on the issue?
SPEAKER_00I'm really appreciative of the fact that you are addressing this concern. It's interesting because I have business friends that they were holding out on providing the information because there was a lot of chatter about whether that it was going to be repealed or not, but then they had to, with any new purchases that they made, they had to file that information. So they had sort of a mixed situation on how they complied with it. But as a business owner, you can't always wait until the very end because there's something else that's gonna be taking your time up. So if if they say we're gonna deal with this by December, and then December is totally booked with actual income-producing activities, you have to finally make that decision. Am I just gonna spend the money on having this filing done so that I'm not being threatened with all these penalties? You know, what risk do you want to take, right? And and you have to make those choices, and we made the choice of going ahead with it. I would like some closure on this.
SPEAKER_01Absolutely. Well, we'll keep fighting up. Nancy Marr of Prime Housing Group in Michigan. Thanks for joining us today.
SPEAKER_00Thank you so much for your time. I appreciate this opportunity and NFAB, just keep doing good work.
SPEAKER_01After a quick break, we'll hear from U.S. Congressman Brad Finstead.
SPEAKER_03Tens of millions of small businesses across the nation operate during warm weather. A proposed OSHA heat standard mandate would force indoor and outdoor small businesses to comply with unworkable new temperature-specific compliance burdens and paperwork. Learn about its unnecessary regulation and how you can help stop it at nfib.com slash heat standards.
SPEAKER_01And now we welcome Congressman Brad Finstead. And Congressman, I'd like to just start by asking you where the BOI mandate currently stands in Congress.
SPEAKER_04Thanks for having me on. And you know, this is an issue that's important to me as an NFIB member myself, as a member of Congress and a small business owner, and you know, as someone that has seen this firsthand. And I will just say that the domestic businesses are currently exempt from BOI reporting. But the challenge we have is these actions they can be reversed by future administrations. So we kind of have this yin and the yang if another administration comes in and says, okay, we want to do it now. It's just more unpredictability in the countryside for our small businesses. So I'm going to continue to push for and support legislation that permanently eliminates this mandate rather than delaying it and just leaving people again with more uncertainty and unknowns of what's what's to lie ahead.
SPEAKER_01Right. And uh as you mentioned, currently U.S. businesses are exempted, but there were a number before that exemption took place out of fear of penalties, fines, jail time that did submit their information to the Financial Crimes Enforcement Network. Has there been discussion among you and your colleagues about what to do with that data and possibly delete it?
SPEAKER_04Yeah, I mean that that has been part of it because it it still is a mystery to most members of Congress, probably all of us, that what was the intention of that data? Where is it being held right now, and what's the purpose and the use of it? And if we can't answer those questions, we as Congress should be demanding deleting of that data. And, you know, especially now that it's been delayed, it's kind of creating an unfair playing field for those that did out of fear of legal action or fines or whatever that fear was. You know, we have some that did and some that didn't, and it's just something that we should address. So it's my hope again that we have legislation that permanently eliminates this. But if we can maybe tie into that, you know, addressing what currently should be done with the data, I think that's something the Congress should take a look at.
SPEAKER_01Absolutely. And Congressman, have you heard from many constituents about this? And if so, what what are they telling you is their their primary problem with this regulation?
SPEAKER_04Yeah, so I constantly hear from my businesses in southern Minnesota that I have the honor to represent about the business climate regulations, red tape. And you know, I think the thing that a lot of legislators, a lot of members of Congress, and and quite frankly, moreover, bureaucrats don't get. And that's as a small business owner in this country. I mean, you are the CFO, the CEO, you are the janitor, you are the mechanic, you are the HR director. And when are you going to squeeze in on top of all those other duties, plus many more, trying to keep up with the the red tape and the bureaucracy and just the time to do, you know, even some of the things that maybe make sense, but especially when they don't make sense, it is it's what I heard over and over again. Like, tell me again why I have to work 12 hours a day, go home at night, sit at my kitchen table while I'm trying to hang out with my kids and fill out these reports that you're telling me a bureaucrat's gonna maybe park in a in a box and never look at, but yet I'm gonna get fined if I don't do it. That's the story I hear over and over and over again. I mean, really, to me, this is just an example of lack of common sense.
SPEAKER_01Yeah, that's a great point. And what do you recommend small business owners do to help push for repeal?
SPEAKER_04First of all, and I know this is a trap we all fall into. I'm a farmer small business owner, I fall into this trap myself. It's just put your blinders on and you know, do your job and get your work done and keep providing for your family and your employees. But but I would say this is a time where you're gonna have to step out and be comfortably uncomfortable. Be willing to reach out to members of Congress, be able to uh you know reach out and and lend your voice to NFIB and others, and and just don't sit this one out because I always tell people you're either at the table or on the table. And this is an issue that we need to be at the table, making sure our voices are heard as small business owners across this country.
SPEAKER_01Well, we appreciate you being at the table for this debate, too. Before we go, Congressman, is there anything else you'd like to add?
SPEAKER_04I just want to thank uh thank the members of NFIB all across this country. I mean, you are the heart and soul of what makes this country work. Uh, when we talk about what makes America great, you can't help but think of all of the small businesses and all of the moms and pops that are running around all over this country trying to make their backyard better. And that comes to giving a good paying job, making good products, and being good service industries to our neighbors. And so I just want to thank you all for your work and then thank you for your advocacy and making sure that those of us in Congress have a real voice and a real understanding of what we're doing in Congress and how it affects your everyday life.
SPEAKER_01All right, Congressman Brad Finn said of Minnesota. We appreciate your time and your leadership on this issue as well. And I hope you have a good rest of your day. Great, thank you. Josh, the Congressman made some interesting points about where the repeal of beneficial ownership stands in Congress right now. But can you give us a little more context or history about NFIB's involvement on this issue?
SPEAKER_02Sure thing. It's been a long fight. You know, NFIB has been in this fight for almost 10 years now, opposing the Corporate Transparency Act, that's requirement for small businesses to register with the federal government. And sadly, as we know, it was thrown into the NDA in 2021. Right now, we think Congress should throw it back in the NDA and clean up the mess. So that's one thing that we've been fighting for, and we've had great partners in Congress with Congressman Finstead, Congresswoman Fitzback, over in the Senate Center, Kennedy Center, Tubberville. They've all been fighting to have whether it is full corporate transparency act repeal or codification and making the Trump administration American business exemption, making that law so that the four years will not come back, or now it is two and a half years and two and a half years now to come back and hit all our small businesses.
SPEAKER_01So, Josh, the the exemption is currently in place, but where does the issue stand in the more near future? What are your expectations for the remainder of this year?
SPEAKER_02So, right now we're expecting that the treasury final rule will come out. It's it's under review right now. It could come out any day. That would be a good marker to know exactly what the policy is. We don't have that final rule yet. When that does come out, we'll know okay, that's 100% of American small businesses are exempt. And then from there, we also don't know what's gonna happen with the American small business owners' information. Their BOI that they filed about 16 million small business owners that registered with the federal government. We don't know if then we'll delete that information. We've been told under testimony to Congress that they will, but this final rule is gonna hold all the cards. So that's why we've been trying to really put the administration to finalize that rule. So they they're playing their role, but the major role here is Congress, because without congressional action, this thing will come back. This will be a day one priority of the future administration. And as we know, this this law, the corporate transparency act, it's it's so broad, the statute is so broad that it gives Pennsylvania a whole lot of liberty to write regulations in ways that pull in homeowners' associations and individuals with quote unquote substantial control. So it will come back, and that's why we need Congress to really solidify this victory.
SPEAKER_01So, what should all that the owners do to urge Congress to uh make this permanent?
SPEAKER_02Contact your senators, contact your representatives in the House, urge them, say we don't have time to waste. This has got to get done now, whether it's in NDA, whether it's in another MUSPET vehicle that's coming through Congress, we've got to get this done now.
SPEAKER_01That's a good point, Josh, and it's consistent with what the congressman said. Is if we aren't speaking up about this issue, then it's going to make it that much more difficult for anything to be done about it. Before we go, what is the real impact on small business owners? We heard from a member that talked about the cost in time and dollars for her specific business, but more broadly, what's the impact on the small business economy when it comes to the beneficial ownership requirement?
SPEAKER_02It's massive. We already know over 32 million small business owners are required to register. In addition to that massive scope, we know this is the costliest regulatory item that the Trump administration has pulled back. So in total, it was a $128 billion regulatory impact to small businesses. And thankfully, that $128 billion is not on the backs of small businesses right now, but it can be in the future. So that's that's where we get back to we've got to urge the Trump administration, we've got to urge Congress to get this victory in uh full and completely done.
SPEAKER_01In today's show notes, there are links so that small business owners can take action on this issue and send messages to other members of Congress, like you said, Josh, like Congressman Finstead said, uh, to look for those in today's show notes.
SPEAKER_03Thanks for joining us for this week's episode of the Small Business Rundown. Your continued support helps us amplify the issues that matter most. If you like this episode, please help small business owners find the podcast by giving it a rating, like, or review. You can find us at nfib.com and on YouTube, X, LinkedIn, Instagram, and Facebook.