Coalition Letter Opposing the “True Incorporation Transparency for Law Enforcement Act”

By at 6 February, 2018, 10:16 pm

The Honorable Chuck Grassley

The Honorable Dianne Feinstein
Ranking Member

Committee on the Judiciary
United States Senate

Washington, DC 20510


Dear Chairman Grassley and Ranking Member Feinstein:

While the undersigned organizations—which collectively represent millions of small
businesses from all fifty states—support the overarching goal of preventing terrorists and
criminals from accessing capital, we write to express our strong opposition to the True
Incorporation Transparency for Law Enforcement (“TITLE”) Act because of the unprecedented
burdens and complexities that the legislation would impose on millions of small businesses in
America. Rather than hampering bad actors, the TITLE Act, if enacted into law, would hobble
capital formation for small businesses and undermine the privacy rights of law-abiding citizens.

Under the TITLE Act, anyone who forms (or has already formed) a legal entity would
likely need to retain an attorney on a recurring basis to help them determine how far the bill’s
definition of “beneficial owner” extends. Such “owners” may include trusts, corporations,
partnerships, venture capital firms, lenders, creditors, contractors, and lien holders. The potential
labyrinth of direct and indirect “beneficial owners” under the TITLE Act could also change daily
as loans are sold, interests in closely held entities are encumbered, new lines of credit or
financing are accepted, or heirs and trustees are changed in estate plans.

This task is made exponentially more difficult when coupled with the bill’s “lookthrough”
requirement. Ownership of an entity by one or more other corporations or LLCs is
common with small business. The legislation would impose a duty on business owners to look
through every layer of corporate and LLC affiliates to identify if any individuals associated with
any such entities are qualifying beneficial owners, and to report the personal information of those
individuals. In other words, the TITLE Act would compel disclosure of information that
business owners have only limited means to obtain, let alone on a timely basis.

These burdens are further compounded because after initial disclosure, beneficial
ownership information would be required to be updated within 60 days of any changes and
verified in annual filings. Situations may arise where a business may not be aware of a change in
beneficial ownership and would be subjected to civil and possible criminal prosecution under the

Moreover, to the extent the legislation would permit states to collect and disclose
information, it fails to ensure any privacy protections against the public disclosure of this
information. According to the National Association of Secretaries of States, entity information
filed with the state business registry as envisioned by the TITLE Act is public information “thus
beneficial ownership information filed with the state would be public information.” That is
because approximately 40 states have “right to know” laws requiring business filings to be made
public. This lack of privacy protections could harm individuals’ privacy and may jeopardize
early stage investments in start-up businesses. Venture capital firms and other early investors in
innovative start-up enterprises realize value by performing careful analysis and identifying
promising ideas and business models before they are widely recognized. The TITLE Act would
endanger this important vehicle of capital formation for start-up companies in states that exercise
their discretion to collect and disseminate this information without significant changes to their
state public information regimes.

This letter is not exhaustive, but meant to illustrate just some of the many systemic
problems the TITLE Act would create for millions of small businesses in America. We are
committed to rooting out terrorism financing and money laundering, but do not think this
legislation properly achieves that goal. We are willing to work with the Committee and
members of Congress on legislation that addresses these critical national security issues without
imposing unprecedented burdens and risks on the law-abiding job creators we represent.

Air Conditioning Contractors of America
Angel Capital Association
Associated Builders and Contractors, Inc.
Associated General Contractors of America
International Franchise Association
National Association of Manufacturers
National Association for the Self-Employed
National Federation of Independent Business
National Lumber & Building Material Dealers Association
National Retail Federation
National Small Business Association
National Venture Capital Association
Petroleum Marketers Association of America
Promotional Products Association International
Service Station Dealers of America and Allied Trades
Small Business & Entrepreneurship Council
Small Business Legislative Council
Specialty Equipment Market Association
Specialty Tools & Fasteners Distributors Association
The Real Estate Roundtable
Tire Industry Association
U.S. Chamber of Commerce

cc: Members of the Committee on the Judiciary

News and Media Releases