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Federal Register / Vol. 86, No. 233 / Wednesday, December 8, 2021 / Proposed Rules
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Massachusetts trusts, and most limited partnerships, in addition to corporations and limited liability companies LLCs, because such entities appear typically to be created by a filing with a secretary of state or similar office. FinCEN estimates that there are now approximately 30
million such entities in the United States, and that approximately three million such entities are created in the United States each year.128 FinCEN
understands that state and Tribal laws may differ on whether certain other types of legal or business formssuch as general partnerships, other types of trusts, and sole proprietorshipsare created by a filing, and therefore does not propose to categorically include any particular legal forms other than corporations and limited liability companies within the scope of the definition. FinCEN invites commenters to provide information on state and Indian Tribe legal entity formation practices and requirements for consideration.
ii. Foreign Reporting Company Proposed 31 CFR 1010.380c1ii defines a foreign reporting company as any entity that is a corporation, limited liability company, or other entity that is formed under the law of a foreign country and that is registered to do business in the United States by the filing of a document with a secretary of state or equivalent office under the law of a state or Indian Tribe. Similar to the treatment of the phrase corporation, limited liability company, or other similar entity for domestic reporting companies, FinCEN intends to interpret these terms by reference to the requirement to register to do business in the United States by the filing of a document in a state or Tribal jurisdiction. The proposed regulation otherwise tracks the statutory text except to clarify that registration to do business in any state or Tribal jurisdiction suffices as registration to do business in the United States.
As with domestic reporting companies that are created by a filing, there may be questions about how the registered to do business standard applies to different entity types across state and Tribal jurisdictions. The phrase registered to do business may capture more entities than created by the filing of a document because typically a jurisdiction within the United States will require any legal entity formed under the law of any other jurisdictionincluding another jurisdiction within the United States 128 See
Section VI of this NPRM for more information on these estimates.

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to register to do business as a foreign entity if it engages in certain types of activities.129 FinCEN welcomes comments on what activities will trigger foreign entity registration requirements in particular state or Tribal jurisdictions, whether compliance with those requirements constitutes registering to do business, and whether FinCEN should further clarify the registered to do business requirement.
iii. Exemptions The CTA specifically excludes from the definition of reporting company twenty-three types of entities.130 The statute also authorizes the Secretary to exempt, by regulation, additional entities for which collecting BOI would neither serve the public interest nor be highly useful in national security, intelligence, law enforcement, or other similar efforts.131 Except for the proposed clarifications discussed below, as well as minor alterations to paragraph structure and the addition of short titles, FinCEN proposes to adopt verbatim the statutory language granting the twentythree specified exemptions. Each proposed short title summarizes the applicable exemptions, which cover securities issuers, domestic governmental authorities, banks, domestic credit unions, depository institution holding companies, money transmitting businesses, brokers or dealers in securities, securities exchange or clearing agencies, other Securities Exchange Act of 1934 entities,132
registered investment companies and advisers, venture capital fund advisers, insurance companies, state licensed insurance producers, Commodity Exchange Act registered entities,133
accounting firms, public utilities, financial market utilities, pooled investment vehicles, tax exempt entities, entities assisting tax exempt entities, large operating companies, subsidiaries of certain exempt entities, and inactive businesses. These categories of exempt entities either are already generally subject to substantial Federal or state regulation under which their beneficial ownership may be known.
While most of the reporting company exemptions are straightforward, several contain ambiguous language that 129 See, e.g., Cal. Corp. Code sec. 2107, Del. Code tit. 8, sec. 371, New York Consolidated Laws N.Y.C.L., Business and Corporations Code secs.
13011305, Mass. Gen. L. Ann. Ch. 156D, secs.
15.0115.03, Va. Code tit. 13.1, secs. 757759.
130 See 31 U.S.C. 5336a11Bixxiii.
131 See 31 U.S.C. 5336a11Bxxiv.
132 See 15 U.S.C. 78l.
133 See 15 U.S.C. 78od.

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FinCEN proposes to clarify in its regulations. FinCEN first proposes to define public utility 134 via reference to the Internal Revenue Code definition of regulated public utility at 26 U.S.C.
7701a33A. Under this definition, a public utility would generally be a corporation that furnishes or sells electric energy, gas, water, or sewage disposal services, or transportation, at rates established or approved by a government body. Using this preexisting definition should promote predictability and continuity across Treasury and other federal regulations, which may reduce compliance burdens that would otherwise arise from definitional differences among regulatory regimes.
Proposed 31 CFR 1010.380c2xxi clarifies an exemption relating to what the proposed regulations refer to as large operating companies. An entity falls into this category, and therefore is not a reporting company, if it: 1
Employs more than 20 employees on a full-time basis in the United States; 2
filed in the previous year Federal income tax returns in the United States demonstrating more than $5,000,000 in gross receipts or sales in the aggregate, including the receipts or sales of other entities owned by the entity and through which the entity operates; and 3 has an operating presence at a physical office within the United States. 135 Under the proposed regulations, an entity with an operating presence at a physical office within the United States would be one for which the physical office is owned or leased by the entity, is not a residence, and is not shared space beyond being shared with affiliated entitiesin short, a genuine working office of the entity. In the exemption, FinCEN also proposes to clarify what it means to employ someone on a full-time basis through reference to the Internal Revenue Service definition of full-time employee and related determination methods at 26 CFR 54.4980H1a21
and 54.4980H3. These regulations generally count as a full-time employee anyone employed an average of at least 30 service hours per week or 130 service hours per month, with adaptations for non-hourly employees. As with the public utility definition, FinCEN is borrowing the IRS concept to promote regulatory consistency and because most large operating companies should already be familiar with it from compliance with the Affordable Care Act.136 Therefore, FinCEN believes its 134 31

U.S.C. 5336a11Bxvi.
U.S.C. 5336a11Bxxi.
136 See 26 U.S.C. 4980H.
135 31

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