Many U.S. business entities that complied with the FinCEN beneficial ownership information (BOI) reporting obligations have expressed concern over what will happen to their data now that BOI reporting for domestic companies is no longer required. Roughly 16 million companies have already complied, and in the interim, the government has announced that reporting obligations are limited to foreign entities.
A FinCEN spokesperson confirmed their intention to issue a final rule exempting domestic companies from the BOI reporting obligations in the coming year. FinCEN has also indicated that they will address questions about the handling of the data that they had already collected—and how that data will be disposed of now that information reporting is no longer required for U.S. companies.
We asked the authors of Tax Facts, two professors with opposing political viewpoints, to share their opinions about whether Treasury should immediately order that all previously reported BOI reporting data be destroyed.
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Below is a summary of the debate that ensued between the two professors.
Their Votes:
Their reasons:
Byrnes: The government should absolutely act immediately to require that FinCEN destroy any information it obtained during the now-illegal beneficial ownership information reporting period. The BOI reporting regime has been deemed illegal with respect to domestic reporting companies—it’s now limited to foreign entities. The government should immediately act to destroy that data and protect the American business owner.
Bloink: Yes, the BOI reporting regime has been put on hold. That by no means is conclusive evidence that the government should not find a legal way to use and collect this important information. In our current political environment, the FinCEN BOI reporting regime has been deemed impermissible. That’s not to say that the government won’t again find it critical to collect this information.
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Byrnes: Millions of domestic reporting companies attempted to comply with the BOI for fear of incurring significant penalties and even breaking the law for failure to comply. Now, the government has an unprecedented amount of private information about those domestic entities—information that was collected illegally. This data should not be in the hands of the government in the first place.
Bloink: We’re talking about data that was collected in an effort to prevent money laundering and funding for terrorist organizations. The information collected by the government was, and continues to be, extremely important to his end. Rushing to destroy this data immediately would almost certainly be a mistake in the long run.
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Byrnes: We’re talking about illegally obtained private information that was reported under the color of a law that is plainly an illegal exercise of power. Absolutely no justification or rationalization exists to allow the government to keep this information that was obtained in violation of the law, regardless of the purported purpose behind the now-invalid data collection regime.
Bloink: The bottom line is that small business owners complied with the BOI reporting obligation because they knew they had nothing to hide. Government attempts to destroy data often result in situations where that information is not properly guarded and could be made public. Any attempts to destroy BOI-related information should not be immediate and must be well-thought-out and executed properly to protect against data leaks.
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