Accounting
Congress considers how to fix the Corporate Transparency Act
The Corporate Transparency Act passed both Houses of Congress with bipartisan support in 2021 and went into effect on Jan. 1, 2024. Since then, it has been declared unconstitutional by one court and is the subject of lawsuits in at least three other courts.
While it did not garner much awareness at the beginning, the American Institute of CPAs, the National Association of Enrolled Agents, and a number of preparer organizations have been speaking out against its filing requirements and the effect they have on small businesses and those who assist them.
And at a congressional hearing held Tuesday to kick off Small Business Week, Roger Harris, president of Padgett Business Services, predicted massive noncompliance with the act’s beneficial ownership information filing requirements if the rules remain as they currently are.
The CTA requires “reporting companies” — defined as corporations, limited liability companies, or other similar entities registered to do business in the U.S. — to file a beneficial ownership information report with the Treasury’s Financial Crimes Enforcement Network. Beginning Jan. 1, 2024, reporting companies created or registered to do business in the United States before Jan. 1, 2024, must file by Jan. 1, 2025. Reporting companies created or registered to do business in the United States in 2024 have 90 calendar days to file after receiving actual or public notice that their company’s creation or registration is effective.
The 23 exemptions from the filing requirement include tax-exempt entities, credit unions, and public utilities, with the major exemption for large operating companies. A large operating company is one which employs more than 20 full-time employees in the U.S.; filed a federal income tax return showing more than $5 million in in gross receipts or sales, including receipts or sales of other entities owned by the entity and through which the entity operates; and has an operating presence at a physical location in the U.S.
FinCEN estimates there will be approximately 32 million reporting companies in the first year of the reporting requirement and approximately 5 million new reporting companies each year thereafter.
While individually they are small, collectively they represent a major portion of the American economy, according to Harris, who estimated that the 61.6 million small business employees in the U.S. comprise nearly 46% of employees nationwide.
“These are the businesses and entities that will primarily be impacted by the BOI reporting requirement,” he said — and the majority of these small businesses do not have the internal capacity to track and follow the many regulations and compliance requirements that fall on their businesses.
“Small-business owners who get into the business to do the one thing they love are also required to do 99 other things they hate,” he remarked in testimony before the House Committee on Small Business on Tuesday. And while most legislation has small-business exceptions, the CTA specifically targets small businesses.
Harris pointed out that the act’s requirements do not reflect the reality of businesses’ relationship with their tax professionals and other third-party service providers. They will likely have annual or slightly more often communication with them, but will not interact with them on a weekly or monthly basis.
“If a beneficial owner’s driver’s license is renewed, has a name change, or a change in residential address, the requirement to notify FinCEN within 30 days will not be top of mind and would lead to rampant noncompliance,” Harris warned. “Furthermore, third-party service providers are not privy to those changes or made aware of them on a regular basis.”
“While FinCEN argued in its final rule that the reporting company is ultimately responsible for the filing and third parties will be certifying on their behalf, the reality is that the third party may also be subject to the penalties and additional protection is needed to encourage third parties to help,” he said.
Harris suggested that FinCEN work more closely with the Internal Revenue Service to better understand how to educate the tax professional industry, as well as to provide joint guidance and examples, as is common with more complicated tax rules that help empower tax pros to be part of the solution.
Among the examples of where more clarity is needed, Harris cited substantial control of family members, business closers, and changes in number of employees that cause a business to move in and out of the BOI requirements.
“I was encouraged by members on both sides of the aisle,” Harris said after the hearing. “They recognized that something has to change, and hopefully it will lead to a better bill to make it work for everybody. As I left, someone handed me a text of a bill introduced this morning to repeal the CTA. It’s uncertain how far it will go, but it’s an indication that the attitude toward the CTA is changing.”
The Financial Accounting Standards Board released a
The paper pointed out that construction businesses are often subject to contracts that contain retainage (or retention) provisions.
Companies that operate in the construction industry are frequently subject to contracts that include retainage provisions. Those provisions generally offer a kind of security to the customer by permitting the customer to withhold a portion of the consideration billed by the company until certain project milestones are met or the project is finished.
The revenue recognition standard, also known as Topic 606 or ASC 606 in FASB’s Accounting Standards Codification, offers guidance on the presentation of a contract with a customer on the balance sheet as a contract asset or a contract liability and related disclosures, but lacks specific guidance on retainage.
The educational paper explains the presentation and disclosure requirements in GAAP about retainage for construction contractors and provides some examples of voluntary disclosures of retainage that would provide more detailed information about contract asset and contract liability balances.
The FASB staff received feedback from private company stakeholders in the construction industry, as well as the FASB-affiliated Private Company Council, questioning the proper application of Topic 606 guidance to retainage. Some users of private company financial statements, including sureties, provided feedback that information about retainage is important to their analysis.
The educational paper aims to clarify the presentation and disclosure requirements in GAAP about retainage for construction contractors and provide example voluntary disclosures of retainage that would currently be permissible under GAAP and would provide users with more detailed information about contract asset and contract liability balances.
The educational paper doesn’t change or modify current GAAP and isn’t intended to be a comprehensive assessment of the accounting for retainage in accordance with Topic 606. The exhibits included in the paper are for illustrative purposes and don’t create additional requirements beyond those in current GAAP. Entities should refer to current GAAP and consider entity-specific facts and circumstances when preparing financial statements.
Hourly earnings and job growth for workers in small businesses remained mostly unchanged last month, according to payroll provider Paychex.
The
The national Small Business Jobs Index dipped 0.29 percentage points to 99.75 in March, slightly less than the pace set at the end of the past two quarters. At 2.91%, hourly earnings growth stayed below 3% for the fifth month in a row in March, while one-month annualized hourly earnings growth (3.51%) outpaced annual growth (2.91%) for the fourth consecutive month.
“We don’t see any signs of recession,” said Frank Fiorille, vice president of risk, compliance and data analytics at Paychex. “It looks like they’re still doing OK, not gangbusters, but still keeping up with the range that they have done the past few months.”
The Midwest remained the top region for the 10th consecutive month on small business job growth, despite slowing 0.58 percentage points in March. Texas continued to lead the other states on small business job growth in March, while Minneapolis gained 1.87 percentage points to move into first place in March among metropolitan areas. The manufacturing industry gained 1.05 percentage points during the first quarter of 2025 to perform best among the industry sectors on job growth.
On the wage front, Tampa topped the other metro areas in March in terms of both hourly earnings growth (4.20%) and weekly earnings growth (4.00%).
Fiorille doesn’t see much impact on small businesses yet from the tariffs that President Trump administration has
He advises accountants to keep an eye on further developments on tariffs, tax changes and the steady stream of executive orders from the White House.
Prague & Co. was founded in 1988 and has a team of 15 professionals. Its services include accounting, tax and fund administration services to individuals, partnerships and corporations worldwide.
The firm focuses on high-net-worth individuals and alternative investment vehicles engaged in the real estate, timber, private equity and venture capital sectors. (The law firm of Prague & Peters PLLC is not part of the combination and will remain an independent law firm.)
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Financial terms of the deal were not disclosed. EisnerAmper’s Eisner Advisory Group ranked No. 15 on Accounting Today‘s list of the
“With each client, Prague & Company works to understand the intricacies and nuances of each situation and then provides tailored guidance,” said Jay Weinstein, EisnerAmper’s vice chair of industries and markets, in a statement. “As we look to the future, the team at Prague & Company will enhance our Boston presence while deepening our expertise in trusts, estates, foundations, nonprofit organizations, and closely held businesses. We warmly welcome them to the EisnerAmper family.”
EisnerAmper has been busy on the M&A front since it
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