Since the Corporate Transparency Act (“CTA”) was passed in 2021,¹ the push for corporate transparency has trickled down from the federal to state level. To date, four states have introduced their own versions of the CTA: Maryland, New York, Massachusetts, and California. Privacy and cost were major discussion points of CTA related rulemaking.² Although the CTA is far from perfect, the personal identifying information (“PII”) contained on Beneficial Ownership Information (“BOI”) reports is stored on a secured database inaccessible to the public, mostly alleviating individual privacy concerns.³ Are these four states following the federal example or are they choosing to sacrifice individual privacy in order to mitigate costs?

Last February, SB 954 was introduced in the Maryland legislature. That bill closely mirrored the CTA and would have required the state to create a private database for housing the information contained in its required BOI reports.⁴ However, two months after its introduction, the bill was dead. During a March, 2024 hearing, opponents of the bill made note of the cost associated with creating a reporting database, which was approximately two million dollars, and the lack benefits gained from the bill.⁵

To date, only New York has successfully passed corporate transparency legislation. The New York Limited Liability Company Transparency Act⁶ (“NYLLCTA”) is very similar to the CTA except its scope is confined to Limited Liability Companies. When first introduced, the NYLLCTA would have made make beneficial ownership information publicly available.⁷ Following amendment, and as enacted, all provided beneficial ownership information will be stored on a private database.⁸

In March of 2023, H3566 was introduced in the Massachusetts legislature. Rather than mirroring the CTA, this bill only targets limited liability companies, much like the NYLLCTA. Where this bill differs from both the CTA and NYLLCTA is that all BOI disclosures will be made publicly available.⁹ H3566 was referred to the Joint Committee on Economic Development and Emerging Technologies immediately after its introduction.¹⁰ Since moving to committee, the bill has languished with a study order being authorized in May of 2024.¹¹ According to the Massachusetts Bar Association, a Study Order “[t]echnically means the bill be studied during the recess but most often is used as a quiet way to kill a bill.”¹² Time will tell if this general rule holds true, but it would be a clear victory for individual privacy if it does.

Of the four states highlighted here, California’s approach to corporate transparency, detailed in SB 1201 and highlighted in a previous blog post, is the most troubling. If California’s bill becomes law, all beneficial ownership information provided to the California Secretary of State will be publicly available upon filing.¹³ California is the most populated state in the U.S., and it has been at the forefront of the tech-revolution that has allowed millions of Americans to operate a business out of their own home. The fact that SB 1201 could force small business owners that operate out of a personal residence to post their home address on a publicly viewable state record is quite disconcerting.

The purpose of this post has not been to rail against corporate transparency. Preventing bad actors from undermining our economic systems by hiding behind corporate anonymity is a noble goal; however, the implementation of it should not undermine individual privacy rights. While the CTA and NYLLCTA may seem intrusive to some who are required to file BOI reports, knowing that your personal data is secure makes this requirement more palatable. Massachusetts and, especially, California should take notice of the legislative success of both the CTA and NYLLCTA and the failure of Maryland’s SB 954. While the cost of privacy may be high (i.e. storing PII in a secure database), the calculus should be that cost versus the benefit of corporate transparency rather than simply sacrificing individual privacy to mitigate that cost.

1 31 U.S.C. § 5336 (2021).

2 Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. 59,498 (codified as 31 C.F.R. § 1010.380).

3 Id. at 59,582.

4 S.B. 954, 2024 Leg., 446^th Sess.(Md. 2024).

5 Corporations and Associations – Transparency – Beneficial Ownership: Hearing on S.B. 954 Before the S. Comm. on Judicial Proceedings, 2024 Leg., 446th Sess. (Md. 2024).

6 N.Y. Legis. Assemb. S995B. Reg. Sess. 2022-2024 (2023). https://www.nysenate.gov/legislation/bills/2023/S995/amendment/B

7 N.Y. Legis. Assemb. S8439B. Reg. Sess. 2021-2022 (2021).

8 Supra note 6.

9 H.B. 3566, 193^rd Gen. Ct. (Ma. 2023).

10 Id.

11 Id.

12 The Legislative Process, Ma. Bar Ass’n., https://www.massbar.org/advocacy/legislative-activities/the-legislative-process.

13 S.B. 1201, 2023-2024 Reg. Sess. (Ca. 2024).