The NASS Company Formation Task Force is dedicated to examining state company formation processes and developing meaningful recommendations for state and federal consideration. Its mission includes identifying sound policies regarding the collection of corporate entity ownership information and sharing state perspectives with federal officials. The task force works closely with other stakeholder organizations, including the American Bar Association, National Conference of State Legislatures, and the National Conference of Commissioners of Uniform State Laws.
Since 2008, the members of NASS have urged federal leaders to focus on tracking corporate entity ownership information through federal tax filings and customer due diligence (CDD) requirements for U.S. financial institutions. The goal is to assist law enforcement in gaining access to information on criminals who attempt to hide behind front companies and shell entities, without a dramatic and costly restructuring of the state business formation processes and related laws which govern the creation of private corporations in the U.S.
Secretaries of State advocate for the collection of ownership entity information via the best paper trail that already exists at no additional cost to taxpayers or businesses, which includes the following:
- Internal Revenue Service (IRS) Revised Form SS-4 submissions
- U.S. Treasury Department "FBAR" (Report of Foreign Bank and Financial Accounts) disclosures
- U.S. Treasury Department customer due diligence (CDD) requirements for financial institutions
With company ownership data readily available to law enforcement agencies via federal agencies and U.S. financial institutions, the federal government is well-situated to take on the costly, legally intricate task of collecting and verifying beneficial ownership information.
It's not just changing one line on a form. NASS has opposed the Incorporation Transparency and Law Enforcement Assistance Act (S. 1465) since the first version of the bill was introduced in 2008. The legislation is a confusing, overly bureaucratic proposal that would needlessly set in motion a drastic revamping of the business incorporation process in the U.S., with questionable results. While Secretaries of State support the goal of assisting law enforcement in fighting corruption and other financial crimes, the federal government already has an existing process for collecting beneficial ownership information on business entities that are domestically formed. These IRS and U.S. Treasury-based channels are the proper means by which the federal government should be addressing such important national security and law enforcement needs, particularly those that are driven by international regulatory pressures.
Completely altering the manner in which companies are established in the U.S. is not only unnecessary, it is also not an appropriate, effective, or efficient strategy for tracking beneficial ownership information. The implementation of the Incorporation Transparency and Law Enforcement Assistance Act would require an extensive and continuous funding source that does not exist, and few states can afford to finance. With so many states and businesses still struggling during the economic recovery, it is the wrong time to be saddling taxpayers with costly, confusing new regulations, and burdens on legitimate business creation and investment. Moreover, it is unlikely that any new business filing requirements will actually achieve the purpose of exposing criminals and terrorists.
If enacted, the Incorporation Transparency and Law Enforcement Assistance Act would bring federal rulemaking and regulatory authority into an area that has traditionally been the jurisdiction of the states, significantly blurring the lines between federal-state roles, with the following results:
- The law would create sweeping, unnecessary changes to the business formation process in the U.S., when other viable alternatives already exist.
The law would require a significant and costly expansion of state government oversight.
The law would place yet another federal government unfunded mandate on financially overburdened states and businesses.
- The law would impose unworkable regulatory and compliance burdens on states and legitimate businesses, many of which are struggling economically right now, with questionable results.
Current Legislative Information
S. 1465: Incorporation Transparency and Law Enforcement Assistance Act (August 2013)
Legislation Text - NASS Summary and Resources
S. 1483: Incorporation Transparency and Law Enforcement Assistance Act (August 2011)
Legislation Text - NASS Overview - NASS Detailed Summary - NASS List of State Filing Requirements for S. 1483
H.R.3416: The Incorporation Transparency and Law Enforcement Assistance Act (November 2011)
Legislation Text - NASS Summary of H.R. 3416
Other Useful Resources
- NASS State Company Formation Survey (September 2013)
- White Paper: Encouraging Business While Fighting Fraud (July 2013)
- Coalition of Business Organizations Opposing S. 1483 (July 2012)
- American Bar Association Letter Opposing S. 1483 (December 2011)
- U.S. Chamber of Commerce Letter Opposing S. 1483 (September 2011)
- NCSL Letter in Opposition to S. 569 (November 2009)
- Uniform Law Commissioners (ULC) Uniform Law Enforcement Access to Entity Information Act (July 2009)
- Uniform Law Commissioners (ULC) Letter in Opposition to S.2956 (July 2008)
- Letter from Senator Carl Levin (D-MI) Regarding NASS Company Formation Task Force Recommendations (November 2007)
- International Association of Commercial Administrators (IACA) Business Organization Section
- Financial Action Task Force (FATF) Review & Recommendations Information
Related NASS Resources
Letter to Banking Committee Chair on S.569
Letter to HSGAC Chair on S.569
Letter to Chairman Levin (D-MI) Regarding Findings of the NASS Company Formation Task Force
NASS Company Task Force Report & Recommendations
(Approved July 2007; Expired July 2012)