Happy New Year. Welcome to the December 30-January 3 edition of the Main Street Minute from your small-business-advocacy team in Sacramento.

Federal Court Again Blocks the Corporate Transparency Act

Before you read any further, it is highly recommended you read this email NFIB sent to the entire national membership on Friday, December 27. It is of paramount importance.

From the email:

“As of this update – until or unless the courts decide differently – businesses are not required to comply with the CTA’s BOI reporting requirements.”

Background

At the center of it all is NFIB’s lawsuit challenging the Corporate Transparency Act (CTA), Texas Top Cop Shop, Inc., et al. v. Garland, et al. According to a previous NFIB news release, “Earlier this month, the U.S. District Court for the Eastern District of Texas granted a nationwide preliminary injunction in the case, which prevented the U.S. Department of Treasury from enforcing the CTA. Today’s [December 23] decision nullifying that injunction allows the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to enforce the CTA and its beneficial ownership information (BOI) reporting requirements while our lawsuit proceeds.”

Said Beth Milito, executive director of NFIB’s Small Business Legal Center, at the time, “Because of this decision, small business owners must scramble to meet the reporting requirements of this egregious statute. Enforcing a Jan. 1 deadline for compliance will mean massive chaos for our nation’s small businesses. The district court, in granting the preliminary injunction, rightly recognized that the BOI reporting requirements would have devastating consequences for small business owners. Make no mistake, NFIB is already working to quickly appeal this terrible decision and provide our Main Streets with a reprieve from this harmful mandate.”

But wait!

The day after Christmas, the first court issued a new decision.

“The court’s latest decision reinstates the nationwide injunction, blocking the burdensome beneficial ownership information (BOI) reporting requirements for small businesses while the court fully considers the government’s appeal. It also nullifies a previous Fifth Circuit order that allowed the government to begin enforcing the CTA and BOI reporting requirements again,” said NFIB in a news release we issued Friday, December 27.

According to Rob Smith, NFIB Small Business Legal Center senior attorney, “The court’s reinstatement of the nationwide injunction is a welcome sigh of relief for small businesses. Since being told earlier this week that they must urgently submit their BOI reports, our nation’s small businesses have experienced enormous chaos and confusion. Thankfully, the court’s latest decision recognizes that the CTA and BOI reporting requirements pose serious constitutional questions. It also provides Main Streets across the country with a reprieve from this harmful mandate while our lawsuit proceeds.”

Stay tuned.

Meanwhile, back in California

Speaking of burdensome regulatory requirements, don’t think the Golden State is going to sit by quietly without challenging the feds. We’re a half-year into the new requirement on employers to have their Workplace Violence Prevention Plans written. Say what? Workplace violence plans? NFIB California understands fully how this needless, ridiculously time-consuming and highly annoying law, which took effect on July 1, could have been overlooked by busy small business owners.

Still, it’s the law and should be complied with. The state Department of Industrial Relations has set up this webpage with answers to many of the questions about the plans. How many businesses have complied? No one knows, yet, and NFIB has no intention of helping find out. We vigorously opposed Senate Bill 553, which created the plans, and will just as vigorously support any legislation killing the requirement, whose only purpose, as we see it, is to be held high as a shining example of how over-regulated we are as a state.

On Another Matter …

Starting Wednesday, January 1, a new state minimum-wage rate kicks in at $16.50 an hour. This leaves aside all the local government  and industry-specific rates that are higher.

What the FUTA Holds

On California’s outstanding $20 billion loan balance with the federal government over its unemployment insurance trust fund, “Under the federal loan repayment rules, employers now face escalating federal UI taxes that will be directed to repaying the loan principal,” reports the Legislative Analyst’s Office.

“This federal surcharge – technically referred to as the Federal Unemployment Tax Act (FUTA) tax credit reduction – will keep increasing by 0.3 percent each year (up to 5.4 percent total) until the loan is repaid.

“The state is entering its fourth year of repayments, and so employers will pay an additional 1.2 percent federal surcharge in 2025 (equivalent to $84 per workers).”

From the Center on Opportunity and Social Mobility at the American Enterprise Institute.

“By October 2020—just six months into the pandemic—19 states had drawn $34 billion in federal loans to continue paying promised [unemployment] benefits.

“If loans are not repaid promptly, states are forced to pay them back with interest, with the repayment mechanism being automatically growing federal unemployment taxes. States strive at all costs to avoid such tax hikes on jobs, which economists believe are ultimately borne by workers as lower wages. That’s one reason why dozens of states used some $27 billion in flexible federal funds provided during the pandemic to bolster their UI trust funds and repay their loans. 

“Unlike dozens of other states, California and New York devoted almost none of the tens of billions of dollars in flexible federal funds they received during the pandemic toward repaying their loans. They instead spent that money, for example devoting $12 billion to “Golden State stimulus checks” and $2 billion to New York’s unprecedented unemployment benefits program for illegal immigrants.

“Now more than two years after Joe Biden declared the pandemic was over, three states (California, New York, and the US Virgin Islands—which is considered a “state” in the UI system) continue to have federal loan balances.”

More on the Center’s article here.

The Legislature

Convenes next Monday, January 6.

FYI

“People are not eager for politics to mix with their entertainment or commerce experiences. Forty-three percent of adults approve of small businesses speaking out on political issues and 20% disapprove.  But, only a quarter approve of celebrities, professional athletes, or large companies speaking out while 4 in 10 disapprove.” – AP/NORC poll released December 26.

Latest Post on the California Page of the NFIB Website

NFIB California is Recruiting Small Business Leaders for 2025 Legislative Battles—How About You?

Calendar

— January 6, the 2025-2026 session of the California State Legislature begins regular business.

— January 10, Gov. Gavin Newsom submits state budget to the Legislature. He may combine it with a state-of-the-state speech.

— January 24, last day to submit bill requests to the Office of Legislative Counsel. (Related: 5,000 bills too many. California Legislature sets new max on legislation)

Next Main Street Minute January 6.