US Senator Carl Levin, joined by Senators Coleman and Obama, introduced the Incorporation Transparency and Law Enforcement Act on May 1. If enacted, the law will require every LLC and corporation in America to report annually to their state of organization or incorporation the names and other information about their owners. The idea behind the bill is to provide civil and criminal law enforcement authorities with a data base to find those business entities "being misused to commit terrorism, money laundering, tax evasion, or other misconduct." A lot of this information is already available to the IRS.
There will be exceptions for publicly traded corporations and business entities which a state "with the concurrence from the Homeland Security and Justice Departments" has decided "should be exempt because requiring beneficial information from them would not serve the public interest or assist law enforcement." According to Senator Levin, "these exemptions are expected to be narrowly drafted and rarely granted."
Millions of small businesses will be burdened with the time and expense of this law, and pay the penalties for errors and forgetfulness, so the federal government can smoke out a few evil doers (as if they will comply with the law or not find a loophole in the first place.)
Wouldn't a much better solution be to identify those businesses or transactions most susceptible to abuse and require those members/shareholders to be revealed? Financial institutions already have to identify their owners to regulators and those shareholders owning 10% or more must submit to background checks. A narrowly written and less intrusive law should not be that difficult.
The Iowa Secretary of State already asks Iowa limited liability companies to voluntarily reveal their ownership in biennial reports even though neither the current Iowa LLC Act (Iowa Code 490A.131) or the new Iowa LLC Act require such information (similarly situated are corporations under Iowa Code 490.1622).
-Marc Ward
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