H.R. 5119 - The Protect Small Business and Prevent Illicit Financial Activity Act

Last week the House of Representatives passed H.R.5119, entitled the “Protect Small Business and Prevent Illicit Financial Activity Act.”

Because this bill attempts to amend the Corporate Transparency Act, which takes effect on January 1, 2024, it has provoked some attention.

The bill has three separate goals.

H.R. 5119 Gives Companies 2 Years to File

First, the bill modifies 31 USC 5336(b)(1)(B).  Subsection (B) originally gave entities in existence on the date implementing regulations became effective two years to file an initial report.  That two-year deadline was reduced to one year in FinCEN’s Reporting Rule.  

H.R. 5119 would prohibit FinCEN to “adjust the report submission deadline,” thereby reverting back to the original two-year deadline.

H.R. 5119 Codifies the 90-day Rule

Second, the bill codifies the change in report timing, adopted by FinCEN as the Deadline Extension Final Rule, that gives reporting companies formed on or after January 1, 2024 (but before January 1, 2025), 90 calendar days from the date of formation to file an initial BOI report. 

The bill codifies the 90-day rule by amending 31 U.S.C. 5336(b)(1)(C) to provide that an initial report must be filed “not later than 90 days after” the date of formation.

Importantly, the bill does not disturb FinCEN’s sunset of the 90-day rule on January 1, 2025.  Without any further change in the law, reporting companies formed on or after January 1, 2025 would have only 30 calendar days from the date of formation to file an initial BOI report.

H.R. 5119 Would Prohibit Filing of Incomplete Reports

Third, but perhaps most importantly, the bill tries to prohibit FinCEN from giving grace to reporting companies that cannot obtain all of their required information.  

I write that it “tries” because there is a key grammatical error that renders it difficult to interpret.

Section 2 of the bill adds a new subparagraph (H) to 31 USC 5336(b)(1) that reads:

“H) UNABLE TO OBTAIN.—FinCEN may not by rule, guidance, or otherwise, permit a reporting company from submitting a report relating to the inability of the reporting company to obtain or identify information in the alternative to submitting a report required under this subsection.” (emphasis added).

The drafter is likely referring to FinCEN’s pending rulemaking regarding the form of the BOI report in which FinCEN discussed the idea that it might, after the form of the report was finalized, modify it to allow a reporting company to submit a report that left some required items blank.  In this scenario, which FinCEN discussed as a possible alternative to be implemented during 2024, the reporting company would be allowed to say it was “unable to obtain” the required information while submitting the balance of the required information. 

The drafter of the bill presumably intended to prohibit such a rulemaking but seems to have scrambled the syntax, which prohibits FinCEN to “permit a reporting company from submitting.” A more usual syntax would be to prohibit FinCEN to “permit a reporting company to submit” such a deficient report. 

Next Steps for H.R. 5119

The bill has passed the House of Representatives on a vote of 420-1 and is now pending in the Senate. Absent extraordinary action in the Senate, the bill will likely receive no attention until the Senate returns on January 3, 2024.