Listen to this post

On February 16, 2024, the Treasury Department published a proposed regulation relating to new reporting requirements for certain transfers of residential real estate consistent with its rulemaking authority under the Bank Secrecy Act. The rule would require the filing of a Real Estate Report with the Financial Crimes Enforcement Network (FinCEN) after the transfer of residential real estate. Reportable transfers include any transfer, including many gratuitous transactions, of residential real property to an entity or trust not already subject to the Anti-Money Laundering and Countering the Financing of Terrorism regulatory regime. The Real Estate Report will need to be filed electronically on the FinCEN website no more than thirty (30) days after closing.

Residential Real Property

Residential real property includes: (1) any real property located in the United States with a structure designed to be occupied by one to four families, (2) vacant land in the United States zoned for a structure designed for one to four families, or (3) shares in a cooperative housing corporation in the United States. This applies even if there is a commercial component to the property, such as a residential unit located above a commercial enterprise. The proposed rule intends to include single-family homes, townhomes, condominiums, cooperatives, and small apartment buildings designed for four or fewer families. Property within the United States would include property within any of the fifty states, the District of Columbia, the Indian lands as defined in the Indian Gaming Regulatory Act, and any territory or possession of the United States. The broad geographic scope intends to discourage money laundering schemes in exempt territories.

Covered Transferees and Exemptions

The reporting requirements apply when the transferee is not an individual or an exempt entity or trust. For an individual, the real property must be titled in the owner’s name to be exempt from the reporting requirements. Certain entities may be exempt because they are already subject to sufficient data collection, such as securities reporting issuers, including companies that must register securities with the Securities and Exchange Commission. Other examples of exempt entities include depository institution holding companies, banks, credit unions, insurance companies, subsidiaries of exempt entities, broker/dealers in securities, and public utilities. Non-profit entities, however, will not be exempt from the reporting requirements.

Reportable Transfers

The proposed rule makes transfers reportable regardless of value or purchase price. Accordingly, gratuitous transfers like gifts and transfers to trusts would generally be included. The rule does make exceptions for certain low-risk transfers or transfers already subject to sufficient scrutiny. Financed transfers where the real property serves as security for the loan and the financial institution making the loan has an obligation to maintain an Anti-Money Laundering program and file Suspicious Activity Reports would be exempt from the filing requirements. Low-risk transfers resulting in the grant, transfer, or revocation of an easement also enjoy an exemption. Additionally, transfers resulting from death, divorce, or bankruptcy are exempt. Finally, transfers that do not involve a reporting person, discussed below, enjoy an exemption.

Cascading Tiers

The proposed rule creates a cascading tier of reporting persons who will be subject to the reporting requirements. In the first tier, real estate professionals providing certain settlement services in the settlement process must compile the necessary information and file the report. Specifically, the person listed as the closing or settlement agent on a settlement or closing statement usually will fall into this tier. If no one executes the specific settlement functions in the first tier, the second reporting tier falls to the person that underwrites an owner’s title insurance policy of the transferee. If there is no person underwriting a title insurance policy, the third reporting tier falls to the person that disburses the greatest amount of funds in connection with the transfer. If no person meets the first three criteria, the fourth reporting tier falls to the person that prepares an evaluation of the title status. Finally, when no person in the first four tiers participates in the transaction, the fifth reporting tier falls to the person who prepares the deed.

Beneficial Owners

The proposed Real Estate Report will collect information about the beneficial owners of the transferee entity or transferee trust. The definitions of beneficial ownership largely follow the definitions in the Corporate Transparency Act. Real Estate Reports must include information for any individual who, directly or indirectly, either exercises substantial control over the transferee entity or owns or controls at least twenty-five percent (25%) of the ownership interests of the transferee entity. Additionally, the Report must include information on beneficial owners of transferee trusts including anyone who is a trustee, otherwise has authority to dispose of trust assets, is a beneficiary who is the sole permissible recipient of income and principal with a right to demand distribution of substantially all of the assets of the trust, is a grantor or settlor of a revocable trust, or is the beneficial owner of a legal entity or trusts holding one of these positions. However, the rule would not require reporting of subsequent changes in the beneficial ownership of the transferee entity or trust.

For further questions regarding this topic, contact Liskow attorneys Kevin Naccari, Jr. and Leon Rittenberg, III.

Disclaimer: This Blog/Web Site is made available by the law firm of Liskow & Lewis, APLC (“Liskow & Lewis”) and the individual Liskow & Lewis lawyers posting to this site for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice as to an identified problem or issue. By using this blog site you understand and acknowledge that there is no attorney-client relationship formed between you and Liskow & Lewis and/or the individual Liskow & Lewis lawyers posting to this site by virtue of your using this site. The Blog/Web Site should not be used as a substitute for legal advice from a licensed professional attorney in your state regarding a particular matter.

Privacy Policy: By subscribing to Liskow & Lewis’ E-Communications, you will receive articles and blogs with insight and analysis of legal issues that may impact your industry. Communications include firm news, insights, and events. To receive information from Liskow & Lewis, your information will be kept in a secured contact database. If at any time you would like to unsubscribe, please use the SafeUnsubscribe® link located at the bottom of every email that you receive.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Kevin Naccari, Jr. Kevin Naccari, Jr.

Kevin Naccari is an associate in the firm’s Business Transactions practice group focusing on tax and corporate law. With a background in accounting, he brings over seven years of experience as a corporate accountant to his legal practice. His experience spans a diverse…

Kevin Naccari is an associate in the firm’s Business Transactions practice group focusing on tax and corporate law. With a background in accounting, he brings over seven years of experience as a corporate accountant to his legal practice. His experience spans a diverse range of businesses, from small-scale restaurants and convenience stores to large health insurance companies and pre-initial public offering retailers. During his time as an accountant, Kevin focused on inventory system design, maintenance, and financial operations optimization.

Kevin earned his bachelor’s degree in accounting from Louisiana State University before receiving his Juris Doctor, magna cum laude, from Loyola University New Orleans College of Law. During his time at Loyola Law, he served as a judicial extern to the Honorable Carl J. Barbier of the United States District Court for the Eastern District of Louisiana. Additionally, Kevin obtained an LL.M. from New York University.

Photo of Leon H. Rittenberg III Leon H. Rittenberg III

Leon Rittenberg III is a New Orleans native. His practice focuses on serving the needs of small and mid-sized businesses and their owners; including philanthropy and non-profit law, taxation, finance, private equity, estate planning, probate, real estate, mergers and acquisitions and related matters.

Leon Rittenberg III is a New Orleans native. His practice focuses on serving the needs of small and mid-sized businesses and their owners; including philanthropy and non-profit law, taxation, finance, private equity, estate planning, probate, real estate, mergers and acquisitions and related matters. Leon represents the interests of a number of private investors, oil service businesses, marine transportation companies and physician groups. He is a Board Certified Tax Specialist and Board Certified Estate Planning & Administration Specialist, as certified by the Louisiana Board of Legal Specialization. He frequently lectures in areas such as taxation, estate planning and maritime transactions.

Leon is a Fellow of the American College of Tax Counsel. He has been recognized by Chambers USA (Louisiana Marine Finance – 2021; Louisiana Corporate/M&A: Tax section – 2017), Louisiana Super Lawyers (Tax, Estate Planning & Probate and Business/Corporate), and the Best Lawyers in America (Non-Profit/Charities Law and Trusts & Estates) since 2007, and by New Orleans Magazine as one of their “Top Lawyers of New Orleans” for his work in Equipment Finance Law, Mergers & Acquisitions Law and Tax Law. New Orleans City Business selected him for their Leadership in Law class of 2014, which “identifies and honors 50 outstanding legal professionals whose successes in law and contributions to the community have set the pace for the legal community.”