A Senate Committee heard testimony Thursday on a federal bill that would require private corporations to disclose their owners, a requirement Nevada officials fear could cost the state millions of dollars in lost revenues.
The bill would direct states to collect the names and addresses of owners of private corporations and limited liability companies to help law enforcement agencies investigate money laundering, fraud, tax evasion and terrorism financing.
However, the bill would diminish the attraction Nevada has for businesses wishing to keep their corporate ownership secret, said Deputy Secretary of State Robert Walsh.
The secretary of state’s commercial recordings division is expected to collect $74 million from fees paid by companies registering in Nevada as private corporations or limited liability companies, but it might collect far less from out-of-state entities if the rules for incorporation were the same in every state, he said.
“If it makes every state knuckle under to the same set of rules, what’s the attraction for Nevada versus the state of Indiana?” Walsh asked.
In addition, the bill could force Nevada to spend hundreds of thousands or even millions of dollars more to handle recordings for corporate and limited liability companies, Walsh said.
Supporters of the bill, however, say the additional costs would be minimal.
While the bill would give law enforcement officers access to corporate ownership records, it would allow states to determine whether the public would have access to the information.
The National Association of Secretaries of State favored an alternative approach that would require corporations to keep the identity of corporate officials for criminal investigators, but not the names of “beneficial owners,” as defined by federal law. Criminal investigators could obtain information about corporate officials by going to registered agents for the corporations.
North Carolina Secretary of State Elaine Marshall said she opposes the bill because it would require states to keep additional records and would increase state record-keeping costs. She testified for the secretary of states association.
However, representatives of the Justice Department, Immigrations and Customs Enforcement and New York district attorney’s office backed the bill at the committee hearing Thursday.
Nevada Secretary of State Ross Miller opposed the bill in a letter to Sen. Joseph Lieberman, chairman of the Committee on Homeland Security and Governmental Affairs.
Officials recalled how the Permanent Subcommittee on Investigations in 2006 grilled a deputy secretary of state from Nevada on provisions that allowed corporate owners to hide their identities when they incorporated.
Sen. Carl Levin, D-Mich., pointed to testimony that Nevada First Holdings, a corporate registered agent’s firm in Las Vegas, allowed thousands of companies to use strawmen as officers and directors on Nevada corporation filings “to enable the true company owners to ‘retain a higher level of anonymity.’ “
In his letter, Miller outlined steps Nevada took to address issues raised in the 2006 hearing.
The Legislature in 2007 prohibited the use of bearer shares, which belong to whomever holds them. Nevada lawmakers gave the secretary of state authority to investigate fraudulent corporate filings and gave the secretary of state’s office authority to demand the information from companies in criminal investigations. If the corporation fails to comply within three days, their right to do business can be forfeited, Miller said.
Representatives of ICE and the Justice Department objected to that approach, because it would tip off the target of the investigation and could lead to records destruction.
The Justice Department advocates bill amendments to require photos of corporate owners, regardless of whether they are foreign or U.S. citizens. In addition, the Justice Department wants corporate owners to be required to file updates when a business’ ownership changes.
Publicly held corporations, which have shares trading on stock exchanges, would be exempt from ownership disclosure requirements under the bill.
Contact reporter John G. Edwards at firstname.lastname@example.org or 702-383-0420.