In comments submitted to U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN), the Big “I” objected to the definition of “operating presence at a physical office within the United States.”
In January 2021, the Corporate Transparency Act (CTA) became law as part of the National Defense Authorization Act (NDAA). The CTA contains a provision that would create a burdensome new federal reporting requirement for most small businesses.
This burdensome new requirement was originally meant to cover nearly all small businesses including insurance agents.
However, the Big “I" was successful in securing an exemption for independent agents and brokers by showing that insurance producers already provide this “beneficial ownership" information to state regulators and that the additional burden of providing it to the federal government would be duplicative and unnecessary.
Throughout the legislative process, the Big “I" was the only producer group that advocated on behalf of agents and brokers to exclude them from this new onerous requirement.
Without this exemption, the beneficial ownership provision would have required agencies with fewer than 20 employees to file new reports on their beneficial ownership with the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN). Agencies would have to comply with the new requirement annually starting within two years of the law's enactment for existing businesses or upon the incorporation of a new business. The penalties for failure to comply with these reporting requirements are severe, with civil penalties of up to $10,000 and criminal penalties of up to two years in prison.
As a result of the enactment of the CTA, FinCEN recently published a proposed rule and requested comments from interested stakeholders. As mentioned above, the CTA excludes state-licensed insurance producers that have “an operating presence at a physical office within the United States" from the definition of “reporting company." However, the Big “I" believes the proposed rule from FinCEN unreasonably restricts the intended application of the exclusion.
Specifically, the proposed rule creates a definition for the term “operating presence at a physical office within the United States" that does not include:
- Physical offices that are located at a site that is also a residence.
- Physical offices that are not formally owned or leased by entity.
In comments submitted to FinCEN this week, the Big “I" objected to this definition of “operating presence at a physical office within the United States," arguing that Congress imposed no such restrictions on the ability of state-licensed producers to qualify for the exclusion and that the addition of this definition effectively adds new conditions and sweeps certain state-licensed producers into the definition of “reporting company" and incorrectly applying this new requirement to a subset of independent insurance agents.
Additionally, the Big “I" noted that the phrase is clearly understood and does not require a definition, urging FinCEN to simply delete the proposed definition in the final rule and to exclude all state-licensed producers from the definition of “reporting company"—as intended by Congress.
Wyatt Stewart is Big “I" assistant vice president of federal government affairs.