Rule2024-23920
Update to the Public Utility Exemption Under the Beneficial Ownership Information Reporting Rule
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 18, 2024
Issuing agencies
Treasury DepartmentFinancial Crimes Enforcement Network
Abstract
FinCEN is publishing this final rule to clarify an exemption under the beneficial ownership information reporting rule that FinCEN published on September 30, 2022. This rule modifies the language exempting certain public utilities from the definition of "reporting company" in the beneficial ownership information reporting rule to more clearly implement the language of the exemption found in the Corporate Transparency Act.
Full Text
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<title>Federal Register, Volume 89 Issue 202 (Friday, October 18, 2024)</title>
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[Federal Register Volume 89, Number 202 (Friday, October 18, 2024)]
[Rules and Regulations]
[Pages 83782-83783]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-23920]
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DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
31 CFR Part 1010
RIN 1506-AB49
Update to the Public Utility Exemption Under the Beneficial
Ownership Information Reporting Rule
AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.
ACTION: Final rule.
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SUMMARY: FinCEN is publishing this final rule to clarify an exemption
under the beneficial ownership information reporting rule that FinCEN
published on September 30, 2022. This rule modifies the language
exempting certain public utilities from the definition of ``reporting
company'' in the beneficial ownership information reporting rule to
more clearly implement the language of the exemption found in the
Corporate Transparency Act.
DATES: This rule is October 18, 2024.
FOR FURTHER INFORMATION CONTACT: The FinCEN Regulatory Support Section
at 1-800-767-2825 or electronically at <a href="/cdn-cgi/l/email-protection#6701150427010e0904020949000811"><span class="__cf_email__" data-cfemail="d5b3a7b695b3bcbbb6b0bbfbb2baa3">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Background
On September 30, 2022, FinCEN issued the beneficial ownership
information (BOI) reporting rule (``Reporting Rule'').\1\ That rule
implemented the reporting requirements of section 6403 of the Corporate
Transparency Act (CTA), enacted into law as part of the National
Defense Authorization Act of Fiscal Year 2021 (NDAA).\2\ The CTA
requires certain types of domestic and foreign entities, called
``reporting companies,'' to submit information about ``beneficial
owners'' to FinCEN.\3\ The CTA generally defines a reporting company as
a corporation, limited liability company, or other similar entity that
is created or registered to do business in the United States by the
filing of a document with a secretary of state or similar office under
the law of a State or Indian Tribe.\4\ The CTA exempts twenty-three
categories of entities from that definition.\5\ One such exemption is
for ``a public utility that provides telecommunications services,
electrical power, natural gas, or water and sewer services within the
United States.'' \6\
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\1\ 87 FR 59498 (Sept. 30, 2022), codified at 31 CFR 1010.380.
\2\ The CTA is Title LXIV of the William M. (Mac) Thornberry
National Defense Authorization Act for Fiscal Year 2021, Public Law
116-283 (Jan. 1, 2021). Division F of the NDAA is the Anti-Money
Laundering Act of 2020, which includes the CTA. Section 6403 of the
CTA, among other things, amends the Bank Secrecy Act (BSA) by adding
a new section 5336, Beneficial Ownership Information Reporting
Requirements, to subchapter II of chapter 53 of title 31, United
States Code.
\3\ 31 U.S.C. 5336(b)(1).
\4\ 31 U.S.C. 5336(a)(11)(A).
\5\ 31 U.S.C. 5336(a)(11)(B).
\6\ 31 U.S.C. 5336(a)(11)(B)(xvi).
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In the Reporting Rule, FinCEN gave precision to the CTA's public
utility exemption by making a reference to the Internal Revenue Code,
which defines a regulated public utility for tax purposes. The
Reporting Rule states that the exemption applies to ``[a]ny entity that
is a regulated public utility as defined in 26 U.S.C. 7701(a)(33)(A)
that provides telecommunications services, electrical power, natural
gas, or water and sewer services within the United States.'' \7\
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\7\ 31 CFR 1010.380(c)(2)(xvi).
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While the CTA's public utility exemption mentions four types of
public utilities (telecommunications services, electrical power,
natural gas, and water and sewer services), questions have arisen about
the application of the exemption to providers of telecommunications
services because the specific provision cross-referenced in the
Internal Revenue Code definition--subparagraph (A) of 26 U.S.C.
7701(a)(33)--is only part of the definition of a regulated public
utility that provides telecommunications services. Unlike covered
providers of electrical power, natural gas, and water and sewer
services, which are defined in subparagraph (A), covered providers of
telecommunications services are defined by operation of subparagraphs
(D) and (A) together. Subparagraph (D) specifies that a regulated
public utility includes ``a corporation engaged in the furnishing or
sale of telephone or telegraph service, if the rates for such
furnishing or sale meet the requirements of subparagraph (A),'' and
subparagraph (A) sets forth those requirements with regard to rates.
FinCEN intended to cross-reference both of these provisions in the
Reporting Rule's public utility exemption but inadvertently omitted a
reference to subparagraph (D) in the final rule.\8\
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\8\ FinCEN had cross-referenced both (A) and (D) in the proposed
rule, 86 FR 69920 (Dec. 8, 2021).
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On June 10, 2024, FinCEN issued guidance in the form of a
Frequently Asked Question clarifying that the CTA's exemption for
public utilities includes a corporation engaged in the furnishing or
sale of telephone or telegraph services if the rates for such
furnishing or sale meet the requirements of 26 U.S.C. 7701(a)(33)(A),
as specified in 26 U.S.C. 7701(a)(33)(D).\9\
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\9\ FinCEN Frequently Asked Question L.8. (Jun. 10, 2024)
available at <a href="https://www.fincen.gov/boi-faqs">https://www.fincen.gov/boi-faqs</a>.
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II. The Final Rule
In this final rule, FinCEN is amending its regulations, consistent
with its June 10, 2024 guidance, to make clear that certain
telecommunications services providers are exempt from reporting
requirements under the CTA. To avoid any confusion arising from the
cross-reference to subparagraph (A), FinCEN is adding a cross-reference
to subparagraph (D). As amended, the regulation will provide as follows
(new language in bold italics): ``(xvi) Public utility. Any entity that
is a regulated public utility as defined in 26 U.S.C. 7701(a)(33)(A) or
(D) that provides
[[Page 83783]]
telecommunications services, electrical power, natural gas, or water
and sewer services within the United States.'' This amendment will more
clearly conform the regulation's language to the scope of the CTA's
exemption, making it easier for covered entities to understand their
compliance obligations.
III. Public Participation
Because this final rule is a technical clarification that does not
change the scope of the public utility exemption, FinCEN believes it is
unnecessary to solicit comment on this rule. As explained above in
Section II, FinCEN intended the Reporting Rule's public utility
exemption to include telecommunications services providers, as set
forth in the CTA, and understood the reference to 26 U.S.C.
7701(a)(33)(A) to include them. This final rule makes FinCEN's
interpretation of the CTA and the Reporting Rule more clear, without
altering the legal rights and responsibilities of any person. FinCEN
therefore finds that it has good cause to dispense with notice and
comment, pursuant to 5 U.S.C. 553(b)(B).
IV. Effective Date
Because this rule does not impose any obligations on the public,
instead simply clarifying an existing exemption's scope, FinCEN finds
good cause for making this rule effective immediately upon publication
in the Federal Register, as permitted by 5 U.S.C. 553(d)(3).
V. Compliance With Other Authorities
Executive Orders 12866, 13563, and 14094 direct agencies to assess
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic environmental, public health
and safety effects, distributive impacts, and equity). Executive Order
13563 emphasizes the importance of quantifying both costs and benefits,
of reducing costs, of harmonizing rules, and of promoting flexibility.
This rule would not have an annual effect on the economy of $200
million or otherwise constitute a ``significant regulatory action'' as
defined under section 3(f)(1) of Executive Order 12866, as amended.
Accordingly, a regulatory impact analysis is not required.
Because no notice of proposed rulemaking is required, the
provisions of the Regulatory Flexibility Act do not apply.
The Regulatory Flexibility Act, Public Law 96-354, applies only to
rules for which an agency publishes a general NPRM pursuant to 5 U.S.C.
553(b).\10\ This rule is being immediately published as a final rule;
it was not preceded by an NPRM. Therefore, the Regulatory Flexibility
Act does not apply to it.
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\10\ See generally 5. U.S.C. 601 et seq.
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Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA),
Public Law 104-4, requires that an agency prepare a budgetary impact
statement before promulgating a rule that includes a Federal mandate
that may result in expenditure by state, local, and Tribal governments,
in the aggregate, or by the private sector, of $184 million or more in
any one year.\11\ FinCEN has determined that this rule will not result
in expenditures by state, local, and tribal governments, or by the
private sector, of $184 million or more. Accordingly, FinCEN has not
prepared a budgetary impact statement or specifically addressed
regulatory alternatives.
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\11\ The U.S. Bureau of Economic Analysis reported the annual
value of the gross domestic product (GDP) deflator in 1995 (the year
in which UMRA was enacted) as 66.939; and in 2023 as 123.273. See
U.S. Bureau of Economic Analysis, ``Table 1.1.9. Implicit Price
Deflators for Gross Domestic Product'' (accessed Sept. 16, 2024).
Thus, the inflation adjusted estimate for $100 million is 123.273
divided by 66.939 and then multiplied by 100, or $184.157 million.
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The provisions of the Paperwork Reduction Act of 1995, Public Law
104-13, and its implementing regulations do not apply to this rule
because there are no new or revised recordkeeping or reporting
requirements.\12\
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\12\ See generally 44 U.S.C. Chapter 35, 5 CFR part 1320.
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This rule is not a major rule as defined by the Congressional
Review Act, Public Law 104-121.\13\ FinCEN, however, is submitting
reports under the CRA to both Houses of Congress and to the Comptroller
General.
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\13\ 5 U.S.C. 804(2).
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List of Subjects in 31 CFR Part 1010
Administrative practice and procedure, Aliens, Authority
delegations (Government agencies), Banks and banking, Brokers, Business
and industry, Commodity futures, Currency, Citizenship and
naturalization, Electronic filing, Federal savings associations,
Federal-States relations, Foreign persons, Holding companies, Indian--
law, Indians, Indians--tribal government, Insurance companies,
Investment advisers, Investment companies, Investigations, Law
enforcement, Penalties, Reporting and recordkeeping requirements, Small
businesses, Securities, Terrorism, Time.
Authority and Issuance
For the reasons set forth in the preamble, part 1010 of chapter X
of title 31 of the Code of Federal Regulations is amended as follows:
PART 1010--GENERAL PROVISIONS
0
1. The authority citation for part 1010 is revised to read as follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314,
5316-5336; title III, sec. 314 Pub. L. 107-56, 115 Stat. 307; sec.
2006, Pub. L. 114-41, 129 Stat. 457; sec. 701 Pub. L. 114-74, 129
Stat. 599; sec. 6403, Pub. L. 116-283, 134 Stat. 3388.
0
2. In Sec. 1010.380, revise paragraph (c)(2)(xvi) to read as follows:
Sec. 1010.380 Reports of beneficial ownership information.
* * * * *
(c) * * *
(2) * * *
(xvi) Public utility. Any entity that is a regulated public utility
as defined in 26 U.S.C. 7701(a)(33)(A) or (D) that provides
telecommunications services, electrical power, natural gas, or water
and sewer services within the United States.
* * * * *
Andrea M. Gacki,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2024-23920 Filed 10-17-24; 8:45 am]
BILLING CODE 4810-02-P
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