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I recall many small business owners panicking when this requirement seemed to sneak up on them.

Wasn't the purpose of it to aid in mitigating certain types of fraud, like with Covid-19 PPP loans and Medicare?

I could perhaps understand ending the reporting rule, but deleting all existing records? That's very suspicious.
Govt should not have information unless there is a very specific and "in the law" reason for govt to have that information.

If there's no reporting rule, there's no reason for govt to have that information.