Black-Owned Businesses Sue Treasury, FinCEN

BizGrow, Racial Justice

Lawsuit Filed Challenging “Corporate Transparency Act” – An Overreaching New Federal Law Threatening Small Businesses with Fines, Imprisonment 

Lawyers for Civil Rights Joins Black-Owned Businesses and Small Business Development Organizations to Protect Minority Business Owners

In a federal lawsuit filed today, Lawyers for Civil Rights, minority-owned businesses, and their allies took aim at a sweeping new federal law that requires millions of small businesses to report an unprecedented level of private and sensitive information to the federal government. The lawsuit was filed on behalf of the Black Economic Council of Massachusetts, Inc. (BECMA), the African Community Economic Development of New England (ACEDONE), and three Black women business owners in Massachusetts. The lawsuit asks a federal judge to declare the new law unconstitutional and strike it down. 

Under the Corporate Transparency Act (CTA), more than 32 million small businesses must, for the first time, report to the federal government the name, date of birth, address, and government ID number of each “beneficial owner” of their business – a vague term for those with any substantial ownership or control of the business. The federal agency receiving this private and sensitive information – the Financial Crimes Enforcement Network (FinCEN) – can then share the information with numerous other entities, including law enforcement, federal regulators, financial institutions, and even foreign governments. Business owners who do not comply face thousands of dollars in fines and up to two years in prison.

Highlighting the civil rights implications of the new law, today’s complaint outlines how the CTA places a particular burden on businesses owned by people of color, immigrants, non-English speakers, and low-income individuals. These populations often have less access to capital, are less likely to secure loans, and face predatory interest rates. The CTA exacerbates those problems by requiring these business owners to expend significant resources to hire lawyers and submit reports, and by threatening severe civil and criminal penalties if businesses fail to comply. The CTA also chills investment in small businesses because ownership stakes in a small business could now result in fines and imprisonment if the business does not adhere to the CTA’s overly burdensome, vague, and confusing requirements.

Historically, people who sought to register and maintain a business filed basic information about the business and its owners with the appropriate state agency, such as the Secretary of the Commonwealth of Massachusetts. Now, as part of the CTA, the U.S. Treasury Department has stepped in, overreached, and imposed more intrusive requirements, including terms of imprisonment. 

The practical impact of this unprecedented federal overreach is alarming:

  • Business owners may face unprecedented scrutiny by financial institutions when applying for loans;
  • The federal government will hold onto this private and sensitive information for years, increasing the risk that the information will be shared or leaked; and
  • Individuals who may be seeking to adjust their immigration status will be forced to identify themselves and risk immigration enforcement.

“BECMA’s membership includes hundreds of Black-owned small businesses that could come into the crosshairs of the federal government because of this new law,” said Nicole Obi, the President and CEO of BECMA. “As our mission is to drive economic equity and prosperity for Black-owned businesses and Black communities, we must challenge a law that would threaten the viability of so many small and diverse firms across the Commonwealth.”

“Small businesses play a crucial role in our community, which has a large population of immigrants and refugees,” said Abdul Hussein, the Founder and CEO of ACEDONE. “We provide small business owners, many of whom speak limited English, with programs and services to help them succeed. This lawsuit is our way of standing up for the business owners that we support and the community we represent.”

“People of color, immigrants, non-English speakers, and low-income individuals who own small businesses already face significant burdens in creating and running those businesses,” said Michael Kippins, Litigation Fellow at Lawyers for Civil Rights. “Now the federal government threatens them with fines and prison time, but we are prepared to protect them from this unprecedented and illegal intrusion into their privacy.”

The case, Black Economic Council of Massachusetts, Inc., et al. v. Yellen, et al., No. 24-CV-11411, was filed today in the U.S. District Court for the District of Massachusetts in Boston.

Click here to download the complaint.