The ‘beneficial ownership’ proposition undermines tax reform

Every year state governments recognize over two million new business entities. That’s over 5,000 new businesses every day. The speed with which they are founded strongly correlates with the strength of a country’s economy. This is one reason the World Bank compares countries based on regulatory red tape affecting business incorporation.

Legislation under consideration in Congress, the Counter Terrorism and Illicit Finance Act, risks tying entrepreneurs’ hands with even more red tape. In fact, it could destroy any benefit some small businesses stand to gain from the tax reform legislation passed last year.

It would require corporations and limited liability companies with fewer than 20 employees to file a form with the Treasury Department at the time of formation, and update it annually, listing the names of all beneficial owners and individuals exercising control.

This proposal carries with it a criminal penalty of up to three years in prison.

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