[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 [www.gpo.gov]
[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 https://www.fincen.gov/boi-faqs.
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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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