Small businesses across the nation — including those right here in Nevada — have a federal judge in Texas to thank for making their holiday season a little cheerier.
Last week, Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas issued a temporary injunction against a new, little-known, federal reporting requirement that would have affected millions of small business owners across the country.
The Corporate Transparency Act (CTA), which was tucked away deep inside the 2021 National Defense Authorization Act (NDAA), would have required corporations with fewer than 20 employees to disclose the personal information of corporate “stakeholders.” The act would have effectively required the vast majority of small business owners in America to register their names, personal information and business details with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) or face massive penalties.
The original deadline for complying with the sweeping new disclosure requirements was Jan. 1, 2025 — and those who failed to file the required paperwork would have faced penalties of $500 per day (adjusted for inflation) or up to $10,000 and two years in prison.
Those seem like pretty steep penalties for not complying with a rule that many small entrepreneurs likely didn’t even know existed — which is why Judge Mazzant wasn’t the only federal judge with concerns over the federal government’s new small-business surveillance scheme. Earlier this year, Judge Liles C. Burke of the U.S. District Court for the Northeastern District of Alabama was similarly unnerved by the reporting requirement, saying, “Although the CTA made up just over 21 pages of the NDAA’s nearly 1,500-page total, the law packs a significant regulatory punch” on unsuspecting small businesses.
Ostensibly, the law was designed to crack down on money laundering through small corporate entities. In practice, as Judge Mazzant pointed out in Texas, it was a “quasi-Orwellian” attempt by the federal government to monitor businesses that are created under state laws and otherwise largely regulated by state authorities.
And that “quasi-Orwellian” surveillance scheme would have been expensive for the small-scale entrepreneurs it targeted.
According to FinCEN, the compliance costs would have been “approximately $22.7 billion in the first year” and $5.6 billion in the years after — an estimate that didn’t even include the potentially crippling fines for businesses that failed to comply with a virtually unknown rule that had been snuck into the depths of a 2021 national defense bill.
Judge Mazzant’s injunction thankfully puts a halt to the federal government’s snooping efforts for the time being. However, there’s no guarantee that the injunction won’t be overturned on appeal — meaning small business owners would be wise to get their paperwork in order, just in case.
The mere fact that some obscure reporting requirement was about to cost small businesses tens of billions of dollars (all so the federal government could collect details about corporate “stakeholders” in little companies) demonstrates just how difficult and unpredictable government often makes life for entrepreneurs. And it’s not just the federal government that has a penchant for hurling costly regulations on otherwise unaware individuals pursuing their version of the American dream.
On the state level, for example, Nevada has one of the most egregious occupational licensing burdens in the nation — a web of red tape that not only makes it costly and difficult for individuals to enter their chosen professions, but also severely handicaps their ability to build their own businesses in specific fields.
Many of the professions targeted by the state’s overzealous licensure requirements are the sort that offer individuals the ability to become their own boss and set their own hours — such as landscapers, barbers, and even interior decorators. Such requirements can often serve as a barrier not only to the profession, but also to the dream of professional autonomy.
Interior decorators, for instance, are expected to pass an exam, fork over nearly $1,500 in fees, have four years of formal education and spend two years working for someone else in the field before getting a license to legally help their own clients sort out where a chaise lounge should be placed in a living room.
Indeed, Nevada regulates a great many professions so heavily as to make it virtually impossible for many workers to begin pursuing new opportunities, regardless of whether they ever hope to one day be their own boss. As of 2022, for example, manicurists had to pass numerous exams, pay out of pocket for 600 hours of instruction and pay the state nearly $200 to get their license — a process that took four times as long and was twice as expensive as what was required to become an emergency medical technician.
For some entrepreneurial endeavors, local ordinances are even more prohibitive. Street vendors, in particular, have long endured severe restrictions on when, how and where they are able to earn a living in this state — restrictions that continue to limit the ambitions of vendors despite a bill passed in 2023 designed to ensure a “pathway” to legalization for the industry.
Even the mere act of registering a business is more expensive in Nevada than almost any other state — a statistic that directly contradicts our state’s reputation as a “business-friendly” jurisdiction.
Indeed, on the federal, state and local level, building the American dream increasingly requires navigating a complex and costly web of legal hurdles, government fees and licensure requirements — with many of those hurdles being hidden behind dense legal language, within nonsensical local ordinances or even tucked away in the depths of some federal national defense bill.
Thanks to a federal judge in Texas, at least one of those hidden regulatory burdens has been put on hold just in time for the holidays. Easing the restrictions placed on small businesses by local and state governments, however, is going to require far more than merely wishing for a seasonal miracle.
Michael Schaus is a communications and branding expert based in Las Vegas, Nevada, and founder of Schaus Creative LLC — an agency dedicated to helping organizations, businesses and activists tell their story and motivate change. He has more than a decade of experience in public affairs commentary, having worked as a news director, columnist, political humorist, and most recently as the director of communications for a public policy think tank. Follow him at SchausCreative.com or on Twitter at @schausmichael.
