The Corporate Transparency Act (CTA), which was passed as part of the National Defense Authorization Act in 2021, contains a provision that creates a new federal reporting requirement for most small businesses. The CTA will go into effect on Jan. 1, 2024. 

This new burdensome requirement was originally meant to cover nearly all small businesses, including insurance agents. However, the Big “I" was successful in securing an exemption for independent agents and brokers by showing that insurance producers already provide this beneficial ownership information to state regulators and that the additional burden of providing it to the federal government would be duplicative and unnecessary. 

Data released by the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) and the National Federation of Independent Business (NFIB) estimate that complying with the CTA will cost a staggering $22.7 billion in its first year and an additional $5.6 billion per year moving forward, affecting 32.6 million small businesses in the first year and five to six million small businesses every year thereafter. 

Also, according to FinCEN, the estimated total time for filing the Beneficial Ownership Information (BOI) reports can take up to 11 hours for a "complex structure" and about six hours for an “intermediate structure." With potential civil and criminal penalties for noncompliance, many small businesses will retain outside legal and accounting counsel, which FinCEN acknowledges will cost up to $2,615 per entity in the first year. Further, the penalties for failure to comply with these reporting requirements are severe, with civil penalties of up to $10,000 and criminal penalties of up to two years in prison. 

The Big “I" was the only producer group that advocated on behalf of agents and brokers to exclude them from this new onerous requirement. Without this exemption, the beneficial ownership provision would have required agencies with fewer than 20 employees to file new reports on their beneficial ownership with FinCEN. Agencies would have had to comply with the new requirement annually starting within two years of the law's enactment for existing businesses or upon the incorporation of a new business. 

Raaed Haddad is Big “I" director of federal government affairs.