The U.S. Department of the Treasury (the “Treasury Department”) and the Financial Crimes Enforcement Network (“FinCEN”) have recently made significant announcements that impact the enforcement and scope of the Corporate Transparency Act (the “CTA”). These developments are expected to reduce compliance burdens for many businesses, particularly domestically formed companies.
Key Takeaways
Recent announcements from FinCEN and the Treasury Department have suspended enforcement of the CTA’s beneficial ownership information (“BOI”) reporting rule under the current FinCEN deadlines, for both domestic reporting companies and foreign reporting companies.[1]
The March 2, 2025 announcement from the Treasury Department indicates that the CTA reporting rules will be modified such that only foreign reporting companies will be subject to the CTA following implementation of such rules.
CTA Scope Expected to be Narrowed
As previously reported in our February 20th legal alert, on February 18, 2025, CTA compliance again became mandatory – albeit not for long – following the stay of a nationwide preliminary injunction that was in effect prior to that time. FinCEN issued a release at that time modifying reporting deadlines and, notably, stating that it would be initiating a process to revise the BOI reporting rule to reduce the burden for lower-risk entities, including many U.S. small businesses. FINCEN stated that this revised approach aligns with broader government efforts to reduce the regulatory burden on businesses while maintaining the integrity of anti-money laundering frameworks.
On February 27, 2025, FinCEN released another announcement, stating that it would not issue fines, penalties, or take enforcement actions against any company for failing to file or update BOI reports by the then-current deadlines. The Treasury Department followed up on FinCEN’s release with its own announcement on March 2, 2025, stating that “with respect to the Corporate Transparency Act, not only will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines, but it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either.” The release goes on to say the Treasury Department “will further be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only.” The rules, if finalized in line with such announcement, are expected to remove all CTA obligations for domestic reporting companies.
This temporary non-enforcement policy, and the potential modifications to the reporting rule previewed by the Treasury Department, provide businesses with much-needed relief and additional time to understand potential future rule changes.
Subject to additional developments and final rulemaking, the status of the CTA is now as follows:
For U.S. Citizens, Domestic Reporting Companies and Their Beneficial Owners
– No enforcement for failure to meet current BOI reporting deadlines. – Proposed Treasury Department rulemaking expected to eliminate CTA obligations completely.
For Foreign Reporting Companies
– No enforcement actions for failure meet current BOI reporting deadlines. – FinCEN Interim final rule for revised reporting deadlines expected to be issued prior to March 21, 2025. – Proposed Treasury Department rulemaking expected to narrow application of the CTA to foreign reporting companies only.
Next Steps
Domestic reporting companies can expect to no longer have filing obligations under the CTA, absent rulemaking that is inconsistent with the Treasury Department’s announcement.
Foreign reporting companies should monitor regulatory developments and expect to potentially have to file some form of BOI reports in accordance with the forthcoming regulations referenced by FinCEN and the Treasury Department.
For more information on the CTA and certain key developments leading up to this point, please refer to Davis Graham’s past CTA legal alerts:
[1] A “domestic reporting company” is defined under the CTA as any corporation, limited liability company, and any other form of entity created by filing with a secretary of state or similar office under the laws of a state or Indian tribe.
A “foreign reporting company” is defined under the CTA as a corporation, limited liability company, or other entity formed under the law of a foreign country that is registered to do business in the United States. Additional clarifications on this definition may be forthcoming as part of the Treasury Department’s proposed rulemaking.
Following the stay of the last-remaining nationwide injunction, the reporting obligations of the Corporate Transparency Act (“CTA”) have been re-instated, with a new deadline of March 21, 2025, for most non-exempt reporting companies.
On February 18, 2025, the U.S. District Court for the Eastern District of Texas in Smith et al. v. U.S. Department of Treasury stayed its nationwide preliminary injunction that prohibited the enforcement of the CTA. The Texas district court’s decision came after the Supreme Court stayed a similar injunction in the McHenry v. Texas Top Cop Shop, Inc. case. Smith was the last remaining nationwide injunction of general applicability prohibiting enforcement of the CTA’s requirements. As a result, CTA reporting is again mandatory, subject to certain revised reporting deadlines.
FinCEN’s Response and New Reporting Deadlines
On February 18, 2025, FinCEN responded to the ruling in the Smith case by publishing an alert notifying reporting companies that beneficial ownership information (“BOI”) reporting requirements are once again back in effect, subject to the below extended deadlines:
Type of Non-Exempt Reporting Company
Extended Deadline
Reporting companies created/registered on or prior to February 19, 2025
March 21, 2025
Reporting companies previously given a reporting deadline later than March 21, 2025
The later deadline*
Reporting companies created/registered after February 19, 2025
30 days after formation
* For example, if a reporting company previously qualified for one of FinCEN’s disaster relief extensions that would have extended such reporting company’s filing deadline to a date after March 21, 2025, then such reporting company will still be subject to such later reporting deadline, rather than the March 21, 2025 deadline.
Potential for Additional Revisions
The CTA and the currently effective reporting deadlines continue to be the subject of pending litigation and legislative and regulatory focus. FinCEN explicitly noted in its latest alert that it continues to assess its options to further modify deadlines, and a number of legal challenges and legislative actions remain active at various stages of the judicial or legislative process, respectively. For the latest on CTA enforcement requirements, visit FinCEN’s CTA landing page, or reach out to your Davis Graham attorney.
In the waning days of the Biden administration, two significant developments arose affecting federal onshore oil and gas leasing. First, the United States Court of Appeals for the Ninth Circuit vacated leases sold at the June 2018 Wyoming oil and gas lease sale but reversed a district court decision vacating other leases. Second, the Bureau of Land Management (BLM) announced an environmental impact statement (EIS) to analyze the greenhouse gas impacts of issuing more than 3,200 leases that have been the subject of litigation brought by the citizens’ group WildEarth Guardians.
In a Long-Awaited Decision, the Ninth Circuit Upholds Vacatur of the June 2018 Wyoming Lease Sale but Leaves Other Sales Intact
On January 17, 2025, a three-judge panel of the Ninth Circuit issued a 98-page decision on appeals of two decisions by the U.S. District Courts for the Districts of Montana and Idaho in Montana Wildlife Federation v. Haaland, No. 18cv69-BMM (D. Mont. May 22, 2020), and Western Watersheds Project v. Haaland, No. 18cv187-REB (D. Idaho Feb. 27, 2020). In those decisions, the district courts vacated oil and gas leases sold at multiple lease sales in multiple states.
The Ninth Circuit largely upheld the district courts’ decisions that BLM violated the National Environmental Policy Act (NEPA) and Federal Land Planning and Management Act (FLPMA) when selling the leases. With respect to the Montana Wildlife Federation decision, two members of the three-judge panel found that, for the June 2018 Wyoming lease sale, BLM did not properly implement an objective in the 2015 greater sage-grouse resource management plans (RMPs) to prioritize oil and gas leasing outside of greater sage-grouse habitat. One member of the panel dissented on this issue.
Then, the Ninth Circuit upheld the Montana Wildlife Federation court’s decision to vacate leases sold at the June 2018 Wyoming lease sale. The court determined that the district court appropriately vacated the leases because the seriousness of BLM’s failure to apply the prioritization objective outweighed the disruptive consequences of vacatur.
With respect to the Western Watersheds Project decision, the Ninth Circuit agreed with the district court that BLM violated FLPMA by shortening the public protest period for leases sold at the June and September 2018 Wyoming lease sales, the June and September 2018 Nevada lease sales, and the September 2018 Utah lease sale. The court further held that BLM violated NEPA by shortening the public comment period for leases sold at the September 2018 Wyoming, Utah, and Nevada lease sales.
The Ninth Circuit, however, held that the Western Watersheds Project court erred in vacating leases sold at the June and September 2018 Wyoming lease sales, the June and September 2018 Nevada lease sales, and the September 2018 Utah lease sale. The court reasoned that, with respect to the procedural NEPA and FLPMA errors, a likelihood existed that BLM could substantiate its decision. The court directed the district court to remand the leasing decisions to BLM for further proceedings in compliance with NEPA and FLPMA but to enjoin BLM from “permitting any surface disturbing activity in the interim.”
The Ninth Circuit’s decision does not necessarily mark the end of this appeal. Parties may seek en banc review of the panel’s decision (i.e., review by the full appeals court.
If no party seeks en banc review, or if en banc review does not produce a different result, then the consequences of the decision are significant with respect to the Montana Wildlife Federation litigation. Although the Ninth Circuit only upheld vacatur of one lease sale, the district court in Montana Wildlife Federation has issued a second decision finding similar error as the appealed decision due to BLM’s application of the prioritization objective in the greater sage-grouse RMPs. In the second decision, the district court vacated the December 2017, March 2018, and June 2018 Nevada lease sales, and the December 2017 and March 2018 Wyoming lease sales. The Montana Wildlife Federation plaintiffs likely will argue that vacatur of those leases should be affirmed in light of the Ninth Circuit’s decision. Furthermore, the Montana Wildlife Federation plaintiffs have brought similar challenges to leases sold at the February, September, and December 2019 and December 2020 Wyoming lease sales and the December 2017, March 2018, and March and December 2019 Montana lease sales. The district court has not yet issued a ruling on those lease sales.
With respect to the Western Watersheds Project litigation, the impacts of the decision are less significant. Although the Western Watersheds Project plaintiffs have also challenged additional lease sales in that litigation (i.e., leases in “Phases Two and Three”), their grounds for challenge differ from those at issue in the appeal. Additionally, the district court has declined to vacate the leases that were the subject of a second phase of that litigation.
Lessees who have leases that are the subject of the Montana Wildlife Federation and Western Watersheds Project litigation should assess the impacts of the Ninth Circuit’s decision on their leases and development plans.
BLM Announces an Intent to Prepare an EIS to Analyze the Impacts of Leasing on Greenhouse Gas Analysis
On January 16, 2025, BLM published in the Federal Register a Notice of Intent to prepare an EIS analyzing the potential impacts of issuing 3,224 oil and gas leases on greenhouse gas emissions. The Federal Register notice stated that the EIS may also analyze other “common impacts” to resources such as wildlife, water resources, and night skies.
The leases to be analyzed in the EIS were the subject of multiple lawsuits, including:
WildEarth Guardians v. BLM, 19–cv–00505 (D.N.M.), 20–2146 (10th Cir.) (challenging leasing decisions in New Mexico);
WildEarth Guardians v. Bernhardt, 16–cv–01724 (D.D.C.) (challenging leasing decisions in Colorado, Utah, and Wyoming);
WildEarth Guardians v. Bernhardt, 20–cv–00056 (D.D.C.) (challenging leasing decisions in Colorado, Montana, New Mexico, North Dakota, South Dakota, Utah, and Wyoming);
WildEarth Guardians v. Bernhardt, 21–cv–00175 (D.D.C.) (challenging leasing decisions in Colorado, New Mexico, Utah, and Wyoming); and
WildEarth Guardians v. Bernhardt, 21–cv–00004 (D. Mont.) (challenging leasing decisions in Montana, North Dakota and South Dakota).
In September 2022, BLM had prepared a draft supplemental environmental assessment (EA) analyzing the potential greenhouse gas impacts from certain leasing decisions; however, BLM never finalized that EA. In the Federal Register notice, however, BLM explained that it had elected to prepare an EIS because of “new science and information related to greenhouse gas emissions, climate change, and the social cost of greenhouse gases . . . and the number of oil and gas leases under consideration.” BLM particularly pointed to the Department of the Interior’s estimates of the social cost of greenhouse gases related in October 2024.
The Federal Register notice provided a timeframe for preparation of the EIS. In total, BLM estimated the EIS would take a minimum of approximately a year and a half to complete. The Federal Register notice did not address whether BLM would approve development on the subject leases while the EIS was ongoing.
Publication of the Notice of Intent opened the scoping process for the EIS. BLM is accepting public comment until March 17, 2025.
Whether the incoming presidential administration will pursue the EIS has not been determined, although the “Unleashing American Energy” Executive Order announced yesterday calls the EIS into question. Lessees should closely watch the status of this EIS and assess its potential impact on their development activities.
On December 4, President-Elect Donald Trump nominated Paul Atkins (“Atkins”) as the next chairman of the U.S. Securities and Exchange Commission (the “SEC” or the “Commission”). The current chairman, Gary Gensler, will step down and conclude his tenure on January 20, 2024, and if appointed, Atkins will replace him.
Atkins was previously an SEC commissioner for six years from August 2002 to August 2008 during the George W. Bush administration. Atkins also served on the staff of two former SEC chairmen, Richard C. Breeden and Arthur Levitt, from 1990 to 1994. Atkins is the founder and CEO of Patomak Global Partners, a fintech and financial consulting firm founded in 2009.
Atkins is known for his advocacy for de-regulation and promotion of the crypto industry.
SEC DIVISION OF EXAMINATIONS PUBLISHES RISK ALERT REGARDING REGISTERED INVESTMENT COMPANIES REVIEW OF CERTAIN CORE AREAS AND ASSOCIATED DOCUMENTS REQUESTED
On November 4, the Division of Examinations (“EXAMS” or the “Division”) of the SEC published a risk alert (the “Risk Alert”) regarding certain core focus areas and associated documents requested from registered investment companies as part of the Division’s examination of registered investment companies (“RICs”).
Examinations of RICs typically focus on whether funds: (i) have adopted and implemented effective written policies and procedures to prevent violation of federal securities laws and regulations; (ii) provide clear and accurate disclosures that are consistent with the funds’ practices; and (ii) promptly address compliance issues, when identified, and include reviewing three core areas: compliance programs, fund governance, and disclosure and regulatory reports. In the context of these core areas, examinations may consider other topics, such as portfolio management, brokerage and trading, valuation, service provider oversight, among others. Examples of areas that may be reviewed during examinations include:
Compliance policies and procedures (both of the funds and their service providers) for their effectiveness and whether they address certain risks, such as the risks associated with expense allocations between the adviser and the fund(s), or among funds and advisory clients;
Board governance processes and the efficacy of board oversight of funds’ compliance programs (e.g., whether boards are getting information necessary to exercise their oversight responsibilities, boards are requesting and reviewing information necessary to understand the issues and make the associated approvals, and funds and their advisers are accurately disclosing information to the boards related to the funds’ fees, expenses, performance, conflicts of interest, or relevant risks);
Funds’ investment advisory agreement approval process and the thoroughness of the board’s review of fund fees for consistency with disclosures (e.g. whether fund boards compared the services to be provided and the fees for such services against those under the adviser’s other advisory contracts or other advisers to RICs, such as peer groups, or other types of clients); and
Fund disclosures in regulatory filings and investor communications for their consistency and appropriateness relative to fund operations, conflicts of interest, and actual portfolio management activities.
The Risk Alert also includes a discussion of examples of deficiencies or weaknesses observed by SEC staff (the “Staff”) related to funds’ and their advisers’ compliance programs based on a review of deficiency letters sent to funds during the most recent four-year period.
Fund Compliance Programs
With respect to Fund Compliance Programs, the Risk Alert identified five examples of deficiencies or weaknesses observed by the Staff:
Funds did not perform required oversight or reviews as stated in their policies and procedures or perform required assessments of the effectiveness of their compliance programs, including funds that did not conduct required annual compliance reviews or compliance testing and funds that omitted material information from (or failed to document) annual compliance reports and did not review third party service providers’ policies and procedures for consistencies with contractual requirements and representations.
Funds did not adopt, implement, update, and/or enforce policies and procedures, including where funds did not adopt and/or implement policies and procedures to prevent violations of federal securities laws in one or more critical areas, the policies and procedures adopted did not appear to be reasonably designed to prevent violations of law, or the policies and procedures did not appear to be effectively implemented.
Policies and procedures were not tailored to the funds’ business model or were incomplete, inaccurate, or inconsistent with actual practices, for example, with respect to derivatives risk management programs, redemption requests, and compliance risks associates with investment strategies or approaches.
•Funds’ Codes of Ethics were not adopted, implemented, followed, enforced, or did not otherwise appear adequate. The Risk Alert noted instances where funds did not appear to have effective policies and procedures to address compliance with their Codes of Ethics, which resulted in trading in restricted securities by access persons, non-reporting by certain conflicted individuals, and non-reporting of covered trades.
CCOs did not provide requisite written annual compliance reports to fund boards, including where the funds did not have an appointed CCO or had an interim CCO who did not prepare the required report.
Fund Disclosures and Filings
Deficiencies and weaknesses observed by the Staff with respect to fund disclosures included instances where registration statements, fact sheets, annual reports, and semi-annual reports contained incomplete or outdated information or contained potentially misleading statements, sales literature and websites appeared to include untrue statements or omissions of material facts, and filings that were not made or not made on a timely basis. Examples included funds that disclosed investment processes or analyses that were not consistent with advisers’ practices, or repeatedly exceeded stated asset investment thresholds and funds that mischaracterized the use of environmental, social, and governance factors in their investment decision-making processes compared to their actual practices, among others.
Fund Governance Practices
Deficiencies and weaknesses observed by the Staff with respect to fund disclosures included instances where:
Fund board approvals of advisory agreements appeared to be inconsistent with the Investment Company Act of 1940, as amended, and/or the funds’ written compliance procedures. For example, where advisory or sub-advisory agreements were not reviewed on a timely basis, where certain information to evaluate advisory agreements was not requested, and where material changes to the advisory agreement, such as changes of control or changes to advisory fees, were not considered.
Fund boards did not receive certain information to effectively oversee fund practices, such as changes to compliance programs and information with respect to illiquid investments.
Fund boards did not perform required responsibilities, including where boards did not make certain required determinations or adopt tailored policies and procedures.
Fund board minutes did not fully document board actions, which also resulted in deficiencies under books and records requirements.
SEC ANNOUNCES ENFORCEMENT RESULTS FOR FISCAL YEAR 2024
On November 22, the SEC announced the results from enforcement actions for the SEC’s fiscal year ended September 30, 2024. According to the press release announcing the results (the “Press Release”), in 2024, the SEC filed 583 enforcement actions, reflecting a 26% decline from fiscal year 2023. Of those 583 enforcements, 431 represented “stand alone” enforcement actions, which was a 14% decrease from fiscal year 2023.
Despite the decrease in the overall number of enforcement actions, the monetary number of fines significantly increased over fiscal year 2024. The total financial remedies for fiscal year 2024 increased 65.5% as compared to 2023 ($8.2 billion vs $4.9 billion in 2023). The $8.2 billion in financial remedies was comprised of approximately $6.1 billion in disgorgement and pre-judgment interest (the highest amount on record) and approximately $2.1 billion in civil penalties (the second highest amount on record). Approximately 56% of the $8.2 billion in financial remedies is attributable to a single monetary judgment obtained following the SEC’s jury trial win over Terraform Labs and Do Kwon, which required the defendants to pay a final judgment of more than $4.5 billion, representing the highest remedies ever obtained by the SEC following a trial.
According to the Press Release, the SEC distributed $345 million to harmed investors during fiscal year 2024 (a significant decrease from the $930 million distributed in 2023). The SEC also received 45,130 tips, complaints, and referrals in fiscal year 2024 (the most ever received in a single year), including more than 24,000 whistleblower tips, resulting in almost $255 million issued in whistleblower awards.
The SEC’s enforcement actions covered a variety of topics, but a few of the key enforcement areas for fiscal year 2024 included off-channel communications, the integrity of investment professionals, and the use of artificial intelligence (“AI”).
Off-Channel Communications
In fiscal year 2024, recordkeeping cases for off-channel communications resulted in more than $600 million in penalties. Since 2021, more than 100 firms have been charged $2 billion in penalties, indicating that the SEC continues to focus its efforts on recordkeeping enforcement.
Integrity of Investment Professionals
In fiscal year 2024, the SEC brought numerous enforcement actions against investment professionals for fraud and other securities law violations. Of the enforcement actions, a few focused on false and misleading statements concerning funds’ holdings and returns and firms overvaluing the obligations held in their advisory accounts.
Use of Artificial Intelligence
In fiscal year 2024, the SEC was also focused on the use of AI. The SEC brought enforcement actions for false and misleading statements about the use of AI in the investment process and false claims promising 100% protection for clients’ funds despite the use of AI.
The Press Release also highlights the enforcement results during the final fiscal year with Gary Gensler as chairman of the SEC. During Gensler’s tenure as chairman, the amount of monetary fines (in billions) has nearly doubled as compared to the fines obtained during former-chairman Jay Clayton’s tenure.
SEC CHARGES ADVISER FOR MAKING MISLEADING STATEMENTS ABOUT SUPPOSED INVESTMENT CONSIDERATIONS
On November 8, the SEC announced a settlement with a registered investment adviser (the “RIA”) related to misleading statements about the percentage of the RIA’s company-wide assets under management (“AUM”) that integrated environmental, social, and governance (“ESG”) factors in investment decisions.
As detailed in the SEC’s order (the “Order”), between 2020 and 2022, the RIA told clients and included in its marketing materials that from 70%-94% of its parent company’s AUM were “ESG-integrated.” These percentages included the RIA’s passive ETFs, which accounted for a substantial portion of the RIA’s AUM, which, according to the Order, was misleading as many of the ETFs could not consider ESG factors in marking investment decisions as they were passive strategies and did not track an ESG-related index. In addition, the Order also found that the RIA did not have comprehensive written policies and procedures concerning how the RIA would determine the percentage of its firm-wide AUM that was ESG-integrated.”
As a result, the SEC’s Order stated that the RIA violated: (i) Section 206(2) of the Investment Advisers Act of 1940, as amended (the “Advisers Act”), which includes that it is unlawful for any investment adviser to “engage in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client;” (ii) Section 206(4) of the Advisers Act and Rule 206(4)-1(a)(5) thereunder, which among other things, includes prohibitions against directly or indirectly publishing, circulating or distributing an advertisement that contains any untrue statement of material fact, or which is otherwise false or misleading;[1] (iii) Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder, which require registered investment advisers to adopt and implement written policies and procedures reasonably designed to prevent violations of the Advisers Act and the rules thereunder; and (iv) Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder, which require make it unlawful for investment advisers to pooled investment vehicles to “make any untrue statement of a material fact or to omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, to any investor or prospective investor in the pooled investment vehicle; or [o]therwise engage in any act, practice, or course of business that is fraudulent, deceptive, or manipulative with respect to any investor or prospective investor in the pooled investment vehicle.”
Without admitting or denying the Order’s findings, the RIA agreed to cease and desist from violations of the charged provisions, be censured, and pay a $17.5 million civil penalty.
SEC ANNOUNCES CHARGES AGAINST ADVISERS IN CONNECTION WITH FORM PF REPORTING FAILURES
On December 13, the SEC announced settlements with seven SEC-registered investment advisers for failing to timely report on Form PF.
Pursuant to Rule 204(b)-1 under the Advisers Act, certain advisers to private funds, as well as certain commodity pool operators and commodity trading advisors, must file Form PF with the SEC. Broadly, Rule 204(b)-1 requires investment advisers that have at least $150 million in private fund assets under management (“AUM”) to file Form PF on a quarterly or annual basis; the frequency of filings and the Sections required to be completed is determined by the size and categorization of the type of private funds they advise.
The SEC uses the confidential information collected on Form PF data to monitor systemic risk in the private fund industry, inform its regulatory programs and rulemaking, assess and identify compliance risks, and determine targets for examinations and investigations. Moreover, Section 204(b)(11) of the Advisers Act requires the SEC to report annually to Congress on how the SEC has used Form PF data to monitor the markets for the protection of investors and the integrity of the markets.
The Form PF violations stemmed from failures on the part of the advisers to make the required Form PF filings over extended periods, many of whom had failed to make Form PF filings over multiyear periods. The seven advisers agreed to pay over $790,000 in combined civil penalties. During the SEC’s investigation, the advisers remediated their filing failures by making the necessary filings.
UPCOMING CONFERENCES
2025
Date
Host*
Event
Location
1/21
MFDF
AI and Fund Compliance
Webinar
1/22
MFDF
In Focus: Small Boards’ Use of Skills Matrices
Virtual
1/24
ICI/IDC
Learn About Legal and Compliance Career Opportunities in the Asset Management Industry
Virtual
1/27-29
MFDF
Directors’ Institute
Carlsbad, CA
2/3-5
ICI/IDC
ICI Innovate
Huntington Beach, CA
2/6
MFDF
In Focus: Understanding Distribution-What the Data Can Tell You
Virtual
2/10
MFDF
Director Discussion Series – Open Forum
Stuart, FL
2/11
MFDF
Director Discussion Series – Open Forum
Naples, FL
3/6-7
MFDF
Fund Governance & Regulatory Insights Conference
Washington, DC
3/12
MFDF
MFDF 15(c) White Paper Webinar Series: Part 3 – Gartenberg Factors Analysis and Challenges
Webinar
3/16-19
ICI/IDC
2025 Investment Management Conference
San Diego, CA
4/2
MFDF
Director Discussion Series – Open Forum
Atlanta, GA
4/15
MFDF
Director Discussion Series – Open Forum
Boston, MA
4/30 – 5/2
ICI/IDC
Leadership Summit
Washington, DC
4/30 – 5/2
ICI/IDC
Fund Directors Workshop
Washington, DC
5/22
MFDF
Mutual Fund Director Compensation: The MPI Annual Survey
Webinar
7/9
MFDF
Director Discussion Series – Open Forum
Chicago, IL
9/8-10
ICI/IDC
ETF Conference
Nashville, TN
10/5-8
ICI/IDC
Tax and Accounting Conference
Palm Desert, CA
10/27-29
ICI/IDC
Fund Directors Conference
Scottsdale, AZ
11/13
MFDF
Mutual Fund CCO Compensation: The MPI Annual Survey Update
Webinar
11/20
ICI/IDC
2025 Closed-End Fund Conference
New York, NY
2026
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Host*
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1/26
MFDF
2026 Directors’ Institute
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3/5
MFDF
2026 Fund Governance & Regulatory Insights Conference
Washington, DC
3/22-25
ICI/IDC
Investment Management Conference
Palm Desert, CA
4/29 – 5/1
ICI/IDC
Leadership Summit
Washington, DC
4/29 – 5/1
ICI/IDC
Fund Directors Workshop
Washington, DC
9/14-16
ICI/IDC
ETF Conference
Nashville, TN
9/27-30
ICI/IDC
Tax and Accounting Conference
Marco Island, FL
10/25-28
ICI/IDC
Fund Directors Conference
Scottsdale, AZ
11/10
ICI/IDC
Closed-End Fund Conference
New York, NY
*Host Organization Key: Mutual Fund Directors Forum (“MFDF”), Independent Directors Council (“IDC”), and Investment Company Institute (“ICI”)
[1] This Rule was replaced by the Marketing Rule with an effective date of May 4, 2021 and a compliance date of November 4, 2022. The marketing related materials at issue predated the Marketing Rule’s compliance date.
On August 1, 2024, the U.S. Senate unanimously passed the bipartisan Good Samaritan Remediation of Abandoned Hardrock Mines Act (“Good Samaritan Act” or “Act”).[1] The House followed suit by passing the Act on December 10, 2024[2], and President Biden signed it into law on December 17, 2024.[3]
The Act is a response to the threat of ongoing contamination from historic abandoned mine lands (“AMLs”), which are often more than one hundred years old—so they predate modern cleanup and remediation requirements and frequently the companies responsible for the contamination no longer exist.[4] However, because AMLs pose environmental and health hazards, individuals and groups have long wanted to clean up these sites—despite having no legal or financial responsibility to do so. Until now, these well-intentioned Good Samaritans have been deterred from doing so because under existing environmental laws like the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.) (“Clean Water Act” or “CWA”) and the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.) (“CERCLA”), they would become legally responsible for all the pre-existing pollution from a mine site, even if they played no role in causing it. The Act seeks to address this problem by offering limited permits and legal protections for Good Samaritans willing to clean up these sites.[5]
According to the Government Accountability Office, there are at least 140,000 abandoned hardrock mine features across the country—over 60% of which pose or may pose safety or environmental hazards.[6] While this figure is staggering, federal officials estimate there could be more than 390,000 additional features on federal land they have yet to account for.[7] While federal agencies will often intervene to shoulder remediation costs when the mining company responsible for the mine no longer exists, there are more abandoned mines than funds to clean them up—which is where these Good Samaritans come in.[8]
Who can be a “Good Samaritan”?
A “Good Samaritan” can be any person—including a state agency, local government, nonprofit, and private organization (including a mining company)—so long as it: (i) is not a past or current owner or operator of the abandoned site (or a portion thereof); (ii) had no role in the creation of the historic mine residue; and (iii) is not potentially liable under any law for the remediation, treatment, or control of the historic mine residue under any federal, state, local, or Tribal law.[9]
Eligible Sites
The Act applies to “abandoned hardrock mine sites,” which are defined as abandoned or inactive hardrock mine sites (including any facility associated with the mine site) that were used for the production of a mineral (excluding coal) on non-federal land or on federal land under the Mining Law of 1872 (Revised Statutes §§ 2319–2352) and for which there is no responsible owner or operator who is potentially liable for environmental remediation under applicable laws.[10] This includes sites that were previously subjected to a final CERCLA response action or similar federal or state cleanup programs, including brownfields revitalization.[11] However, the Act excludes mines and associated facilities that: (i) are in a temporary shutdown; (ii) are on the National Priorities List; (iii) are undergoing planned or ongoing CERCLA or similar state or federal cleanup actions; (iv) have a responsible owner or operator[12]; or (v) actively mined or processed minerals after December 11, 1980.[13]
Available Permits
The Act creates a seven-year pilot program during which the EPA Administrator (“Administrator”) may issue two types of permits: (i) Good Samaritan permits and (ii) investigative sampling permits.[14] However, during the pilot program period the Administrator may not grant more than 15 Good Samaritan permits in total and 15 investigative sampling permits at any one time.[15]
Good Samaritan Permit
To be eligible for a Good Samaritan permit, a person must submit an application containing detailed information on the site; plans for remediation, post-remediation, contingencies, and health and safety; the work schedule; a budget; and a list of the parties involved, including their legal rights to the site and expertise.[16] The applicant must also demonstrate that: (A) the site is located in the United States; (B) the purpose of the permit is remediation; (C) the proposed activities are designed to result in partial or complete remediation within the permit term; (D) the proposed project poses a low risk to the environment; (E) the applicant possesses the financial, other resources, experience, and capacity required to complete the permitted work and address any and all contingencies as identified in the permit; (F) the person meets the definition of a Good Samaritan (i.e., not liable for the contamination); (G) the person has made “reasonable and diligent efforts to identify” all responsible owners or operators; and (H) no responsible owner or operator exists.[17] By obtaining a Good Samaritan permit, the permittee is excused from obtaining other permits that would otherwise be necessary under the CWA, CERCLA, and state or tribal law.[18] Permits may be transferred if the transferee qualifies as a Good Samaritan, agrees to be bound by the permit terms and any additional conditions imposed by the Administrator, and the head of the relevant federal land management agency approves.[19]
Investigative Sampling Permit
Prior to seeking a Good Samaritan permit, an interested person may apply for an investigative sampling permit to conduct an investigation of historic mine residue, soil, sediment, or water to determine baseline conditions and whether it is willing to perform remediation to address the historic mine residue.[20] The application requirements are less fulsome than those required for a Good Samaritan permit, but still require a description of the site, a list of the parties involved and their legal rights to the site and expertise, previously documented water quality data (if reasonably known), and health and safety and contingency plans.[21] An investigative permit may not allow reprocessing of mining residue, but it may authorize metallurgical testing of historic mine residue to determine whether reprocessing is feasible.[22] An investigative permit does not obligate the person to remediate the site, and the person will still receive the legal protections for the work conducted under the investigative permit.[23] However, if the permittee wishes to convert its investigative sampling permit to a Good Samaritan permit, it must do so within a year.[24]
Reprocessing / Recycling
The Act prohibits mining activities (i.e., mineral exploration, processing, and beneficiation).[25] However, the reprocessing or recycling of historic mine residue (i.e., re-mining) may be permitted if the materials only include historic mine residue, the reprocessing is approved as part of the remediation plan, the proceeds from the sale of the materials are used to defray the costs of the remediation and (if required by the permit) to reimburse the EPA or other federal land management agency, and any remaining proceeds from the sale are deposited into the Good Samaritan Mine Remediation Fund.[26]
Liability Protections
The Act provides protection from liability under the CWA and CERCLA—for both Good Samaritan permits and investigative sampling permits—during and after the permit term, so long as the permittee only carries out activities authorized under the terms of its permit.[27] And as noted above, investigative sampling permits that are not converted to a Good Samaritan permit still enjoy liability protections.[28] Good Samaritans and cooperating persons carrying out actions pursuant to and in compliance with a permit are also excused from compliance with several requirements under the CWA, including the need to obtain a permit under CWA §§ 402 or 404, as well as the remediation permit requirement of CERCLA § 121(e).[29] Thus, a Good Samaritan permittee does not need to obtain a federal, state, or local permit for any removal or remedial action conducted entirely onsite.
Importantly, however, if a violation of either permit causes a worsening of environmental conditions, the permittee must return the site to its prior condition or all liability protections will be revoked and the permittee will be subject to all applicable environmental laws, including citizen lawsuits under the CWA.[30] Additionally, if the Good Samaritan commingles the permitted discharge or waste with other mining waste or discharge that is not covered under the Good Samaritan Permit, the other waste or discharge is not protected, and full federal, state and local permitting requirements apply to that waste or discharge.[31]
Remediation Fund
The Act creates a Good Samaritan Remediation Fund for each federal land management agency that authorizes a Good Samaritan project, as well as the EPA, to assist with funding for approved projects.[32] In addition to the excess proceeds from reprocessing materials, the Fund is comprised of appropriated monies, collected financial assurance monies, any monies collected for long-term operations and maintenance of a completed project under an agreement with the applicable federal land management agency, and any donated monies.[33]
Public and Government Participation
The Act contains numerous requirements for public involvement, environmental review, public hearings and state, local, and tribal government consultation.[34] Additionally, the issuance or modification of a Good Samaritan permit (but not an investigative sampling permit), is considered a “major Federal action” for purposes of the National Environmental Policy Act (“NEPA”),[35] and such permits may only be issued for projects for which the NEPA lead agency issues a Finding of No Significant Impact (“FONSI”).[36]
Future of the Act
While the pilot program is limited to 15 lower-risk projects, when it sunsets, the Administrator must prepare a comprehensive report on the results of the program for Congressional review.[37] This report must incorporate recommendations on whether the program should be continued, including a description of any program modifications and amendments to existing law that should be made to continue the purposes of the Act.[38] Thus, while the 7-year pilot program will likely only achieve modest gains in cleaning up AMLs, given the magnitude of the AML issue and long-standing appetite for cleanup liability protection, it is likely that we will see some form of the program continue into the future.
[4] The U.S. Environmental Protection Agency estimates that hardrock mines have contributed to the contamination of 40% of the country’s rivers and 50% of all lakes. Gov’t Accountability Office, From Gold Rush to Rot—The Lasting Environmental Costs and Financial Liabilities of Hardrock Mining (Feb. 22, 2023), https://www.gao.gov/blog/gold-rush-rot-lasting-environmental-costs-and-financial-liabilities-hardrock-mining.
[6] U.S. Gov’t Accountability Office, Abandoned Hardrock Mines: Information on Number of Mines, Expenditures, and Factors that Limit Efforts to Address Hazards 15 (Mar. 2020).
[12] A “responsible owner or operator” includes any person that is legally responsible under the CWA and financially able to comply with the CWA’s requirements, or a present or past owner or operator or other liable party under CERCLA who is financially able to comply with CERCLA’s requirements. Id. § 2(16).
A panel of the Fifth Circuit has reinstated the nationwide preliminary injunction blocking enforcement of the Corporate Transparency Act (the “CTA”). This decision comes just three days after another panel of the same court stayed the injunction. As a result of this newest ruling, Reporting Companies are once again not required to comply with the CTA’s reporting obligations, including the recently extended deadlines.
Earlier this week, as discussed in our December 24, 2024 Legal Alert, a panel (the “motions panel”) of the Fifth Circuit Court of Appeals granted an order in favor of the government’s emergency motion to vacate the preliminary injunction issued by the U.S. District Court for the Eastern District of Texas, such that filing obligations again became mandatory. However, in an order filed December 26, 2024, a different panel of the Fifth Circuit (the “merits panel”) has vacated the motion panel’s stay of the nationwide preliminary injunction, reviving the injunction. As a result, the obligation for Reporting Companies to file beneficial ownership information reports (“BOIRs”) is once again non-mandatory unless and until the injunction is removed or overturned.
FinCEN issued a statement today recognizing the latest order, stating that “as of December 26, 2024, the injunction issued by the district court in Texas Top Cop Shop, Inc. v. Garland is in effect and reporting companies are not currently required to file beneficial ownership information with FinCEN.” The statement can be found here, under the “Alerts” portion of the page.
Given the ongoing uncertainty surrounding the enforcement of the CTA, we recommend that Reporting Companies continue any analysis and preparation of BOIRs and remain prepared to file promptly if required.
Our team will continue to monitor developments and provide updates as they occur. If you have questions about your obligations under the CTA or how the injunction impacts your company, please contact your Davis Graham attorney.
For more information on the CTA’s reporting requirements, please refer to Davis Graham’s past CTA legal alerts:
On December 23, 2024, the Fifth Circuit granted the government’s motion to stay the preliminary injunction that was issued by the U.S. District Court for the Eastern District of Texas in the Texas Top Shop case. The injunction had temporarily suspended reporting requirements under the Corporate Transparency Act (the “CTA”). As a result of the Fifth Circuit’s order, the CTA’s mandatory reporting is back in effect, subject to short extensions of certain reporting deadlines, as detailed below.
As noted in our December 6, 2024 Legal Alert, a nationwide preliminary injunction was issued earlier this month that temporarily blocked the enforcement of the CTA and its implementing regulations and reporting deadlines. As a result of the injunction, “Reporting Companies” (i.e., companies that are obligated under the CTA to file beneficial ownership information reports with the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”)) were not required to comply with the CTA while such injunction was in effect.
The government quickly filed an emergency motion with the Fifth Circuit to stay the preliminary injunction issued by the U.S. District Court for the Eastern District of Texas. On December 23, 2024, the Fifth Circuit ruled on that motion, finding that “the government has made a strong showing that it is likely to succeed on the merits in defending the CTA’s constitutionality,” and granted an order in favor of the government, removing the preliminary injunction. As a result of the order, the CTA and its regulations remain enforceable, and compliance is mandatory.
Shortly after the Fifth Circuit’s order was published, FinCEN issued an alert (available here) granting an extension to Reporting Companies for the following reporting deadlines:
Creation or Registration Date
Revised Deadline
Prior to January 1, 2024
January 13, 2025
On or after September 4, 2024 with an original filing deadline between December 3, 2024 and December 23, 2024
January 13, 2025
On or after December 3, 2024 and on or before December 23, 2024
Have an additional 21 days from their original filing deadline
The Fifth Circuit’s order did not include a ruling on the constitutionality of the CTA, which remains the subject of litigation pending in various courts across the country. Until such a determination is made with general applicability, we expect the CTA’s framework to remain in flux.
Nonetheless, as of the date of this alert, the CTA and its regulations are in effect and enforceable. Accordingly, Reporting Companies that have not already filed with FinCEN should review their filing obligations under the CTA. If a report is required, such report should be filed within the applicable deadlines.
On December 12, 2024, the U.S. Fish and Wildlife Service (FWS) published a rule proposing to list the monarch butterfly as threatened under the Endangered Species Act (ESA), provide protective regulations under section 4(d) of the ESA, and designate critical habitat for the species (the “Proposed Rule”). FWS is accepting comments on the Proposed Rule until March 12, 2025.
FWS identified the monarch butterfly as a candidate for listing in 2020. In response to a federal lawsuit, FWS committed to make a listing decision for the monarch butterfly by September 2024, later extended to December 2024. The Proposed Rule follows.
The vast majority of monarch butterflies in North America are migratory, and the species’ North American range covers approximately 2.8 billion acres. For comparison, the land area of the continental United States land area is roughly 2 billion acres. In eastern North America, some monarchs travel over 2,000 miles between Canada and central Mexico. Monarchs in western North America generally migrate shorter distances, traveling from Canada to Baja California or the California coast.
FWS based its listing proposal on several threats to the species: loss and degradation of breeding, migratory, and overwintering habitat; exposure to insecticides; and effects of climate change.
With respect to habitat loss and degradation, FWS specifically emphasized the conversion of grasslands to agriculture as a key driver for past population declines. While monarchs require habitat with milkweed and nectar plants within their breeding and migratory range, FWS indicated that activities that may remove these plants but that do not result in conversion of grassland, shrubland, or forested habitats are not considered key population drivers. FWS also highlighted the importance of monarchs’ overwintering habitats, where the butterflies cluster in the fall and winter. These overwintering habitats are largely limited to central Mexico, Baja California, and California. FWS cited logging in Mexico and urban development in California as some of the primary stressors in these areas.
Regarding the use of insecticides, FWS recognized that insecticide use is most often associated with agricultural production. FWS noted, however, that any habitat where monarchs are found may be impacted by insecticide use—citing personal use by homeowners and treatment of forests and parks as examples.
Finally, FWS found that climate change may both directly and indirectly impact the species. FWS recognized increased storm frequency and extreme drought as potentially catastrophic events for the monarchs. Additionally, FWS cited changing precipitation patterns and temperatures as potentially detrimental to the specific microclimate that the monarchs require at their overwintering habitats. In addition to these and other direct impacts, FWS also identified the predicted loss of suitable overwintering trees and habitat caused by increased temperatures and rising sea levels as a threat to the species.
What this means for Land Users—The Proposed Listing, 4(d) Prohibitions, and Critical Habitat Designation
FWS proposed to list the monarch butterfly as a threatened species. Section 4(d) of the ESA directs FWS to issue regulations deemed “necessary and advisable to provide for the conservation of [a threatened] species,” and authorizes FWS to prohibit any act that would be prohibited were the species listed as “endangered.” These acts are detailed under section 9(a)(1) of the ESA, and include “take” of the species—which is defined as harming, harassing, and killing the listed wildlife, among other actions. “Take” also includes significant habitat modification or degradation if it kills or injures the wildlife by significantly impairing essential behavioral patterns.
In this case, FWS proposes to use its Section 4(d) authority to prohibit all acts listed in section 9(a)(1), including take of the species, with the following specified exceptions:
Activities that may maintain, enhance, remove, or establish milkweed and nectar plants within the breeding and migratory range that do not result in conversion of native or naturalized grassland, shrubland, or forested habitats. FWS specifically identifies certain activities as falling within the exception’s scope: livestock grazing and routine ranching activities; routine agricultural activities; fire management activities; maintenance, enhancement, removal or establishment of milkweed and nectar plants on residential and other developed properties; and “vegetation management activities” (including mowing and ground disturbance) that remove milkweed and/or nectar plants when conducted at times of year when monarchs are not likely present;
Monarch mortality due to vehicle strikes;
Non-lethal small-scale (less than 250 butterflies) collection; and
Non-lethal scientific research and educational activities involving a limited number (less than 250) of monarchs.
Notably, there is no proposed exception for mortality from collisions with wind turbines. FWS has requested comments addressing whether an exception for such collisions, as well as other “direct impacts from transportation and energy infrastructure” should be included.
To engage in land use activities that will result in prohibited incidental take of protected wildlife on private lands, land users must obtain a permit from FWS. To obtain a permit, the land user must have entered into a candidate conservation agreement with assurances (CCAA) with FWS prior to listing, or must develop an approved habitat conservation plan. FWS has approved a nationwide CCAA for the monarch butterfly that is specific to energy and transportation rights-of-way lands and covers the continental United States.
In addition to listing the monarch butterfly as threatened, FWS has proposed to designate critical habitat for the monarch butterfly under the ESA. Critical habitat designations do not affect activities by private landowners when there is no federal permit or federal funding involved in the activity. Rather, federal agencies are prohibited from destroying or adversely modifying designated critical habitat. The proposed critical habitat designation for the monarch butterfly is limited to the monarchs’ overwintering habitat along the California coast. In total, approximately 4,395 acres in Alameda, Marin, Monterey, San Luis Obispo, Santa Barbara, Santa Cruz, and Ventura Counties, California, fall within the boundaries of the proposed critical habitat designation.
Finally, the ESA requires federal agencies to consult with FWS to ensure their actions do not jeopardize the continued existence of endangered or threatened species, in a process known as “section 7 consultation.” Section 7 consultation can lead to delay and additional conservation measures for any project that is on federal land, requires a federal permit, or is funded by federal agencies. Federal actions that do not affect listed species or critical habitat do not require section 7 consultation.
Public Participation and Next Steps
FWS is accepting public comment on the Proposed Rule until March 12, 2025. As noted, FWS has specifically requested comments addressing “[w]hether [FWS] should include an exception for direct impacts from transportation and energy infrastructure, including mortality from collisions with wind turbines.” FWS will also hold two public meetings followed by public hearings, to take place remotely on January 14, 2025 from 4:00 p.m. to 6:30 p.m. (mountain time), and January 15, 2025 from 6:00 p.m. to 8:30 p.m. (mountain time).
The ESA requires that FWS issue a final listing rule or withdraw the proposed rule within one year of publication of the proposed rule (i.e., by December 12, 2025). The ESA allows FWS to extend this deadline by six months if there is substantial disagreement regarding the sufficiency or accuracy of available data relevant to the proposed listing rule. To withdraw a proposed rule, FWS must make a finding, subject to judicial review, that there is not sufficient evidence to justify the proposed action.
Written by Kathleen Schroder and Stephen Snow. Please contact Katie Schroder with questions about the proposed listing rule or its effect.
As of the date of this alert, the Corporate Transparency Act, including the applicable reporting rules and the January 1, 2025, reporting deadline, have been enjoined pursuant to a preliminary injunction that applies to all Reporting Companies (as defined below).
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction temporarily blocking the enforcement of the Corporate Transparency Act (the “CTA”), its implementing regulations and the associated reporting deadlines. As a result of the injunction, “Reporting Companies” (that is, companies that were under an obligation to file beneficial ownership information reports (“BOIRs”) with the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) pursuant to the CTA and its implementing regulations) need not comply with the CTA while such injunction is in effect. However, the injunction is only temporary and could be lifted or stayed at any time, thus reviving Reporting Companies’ reporting obligations.
Key Points:
Immediate Impact of the Decision: The court enjoined enforcement of the CTA in its entirety, including FinCEN’s implementing regulations and the January 1, 2025, reporting deadline applicable to reporting companies formed prior to January 1, 2024. As a result, Reporting Companies are not required to submit BOIRs until the court’s decision is overturned or the preliminary injunction is lifted or stayed. For Reporting Companies that have already filed BOIRs with FinCEN, no action is required at this time.
Temporary Relief: The preliminary injunction is based on the district court’s finding that federal enforcement of the CTA is “likely unconstitutional.” However, a determination has not been made that the CTA is unconstitutional. The injunction is therefore temporary in nature and is not the final say on constitutionality. The United States government filed an appeal on December 6, 2024. Should the injunction be lifted or the order reversed, Reporting Companies may have to make BOIR filings on short notice.
Actionable Steps for Reporting Companies: Reporting Companies should monitor the status of the injunction and remain in frequent contact with their advisors as to the status of the injunction and the CTA generally. We advise Reporting Companies to continue gathering necessary information for their BOIRs to be able to file on short notice if the injunction were to be lifted or the order reversed.
At the time of this publication, FinCEN has not announced how it plans to handle the injunction. Therefore, Reporting Companies should also stay informed about FinCEN updates in conjunction with the progress of the pending appeal of the injunction and other potential CTA-related court rulings.
If you have questions about your reporting obligations or the temporary preliminary injunction, please reach out to your Davis Graham attorney.
For more information on the CTA’s reporting requirements, please refer to Davis Graham’s past CTA legal alerts:
On November 7, 2024, the Office of Investment Security of the Department of the Treasury published a final rule (“Final Rule”) amending the regulations at 31 C.F.R. Part 802 to expand the authority of the Committee on Foreign Investment in the United States (“CFIUS” or the “Committee”) to review transactions entered into on or after December 9, 2024, involving certain types of U.S. real estate. 89 Fed. Reg. 88,128 (Nov. 7, 2024).
CFIUS, a committee comprising representatives of various federal agencies and chaired by the Secretary of the Treasury, reviews inbound foreign investments in the United States to evaluate risks to U.S. national security. If CFIUS identifies national security risks relating to a particular transaction, it may recommend that the President order cancelation or modification of the transaction or, if the transaction has already concluded, divestment.
CFIUS has broad authority to review (a) “covered control transactions,” which involve a foreign person acquiring control over a U.S. business; (b) “covered investments,” which involve non-controlling investments by a foreign person in a U.S. business involved in critical technologies, critical infrastructure or sensitive personal data; and (c) “covered real estate transactions,” which involve a foreign person acquiring certain property rights commonly associated with leasehold and ownership interests in “covered real estate” located within a specified distance of the national security-related facilities and installations enumerated on Appendix A to 31 C.F.R. Part 802.
More specifically, “covered real estate” means real estate that is located within (a) certain airports and seaports, (b) close proximity (i.e., a one-mile radius) of any military installation, facility or other property of the U.S. government listed on Part 1 of Appendix A, (c) the extended range (i.e., a 100-mile radius) of any military installation listed on Part 2 of Appendix A, (d) any county or other geographic area identified in connection with the locations listed on Part 3 of Appendix A (i.e., locations in the western United States near underground missile silos), and (e) any offshore range or operating area described on Part 4 of Appendix A (to the extent within the limits of the territorial sea of the United States.)
The Final Rule significantly expands the list of military installations that dictate the definition of “covered real estate”, meaning that, after December 9, 2024, the Committee will have jurisdiction to review a larger number of real property-related transactions. (See the updated Appendix A here.) The Final Rule does the following:
Adds 40 additional military installations to Part 1 (the 1-mile radius list)
Adds 19 additional military installations to Part 2 (the 100-mile radius list)
Moves eight military installations from Part 1 to Part 2
This broadened range of CFIUS’s authority has implications for any person doing projects related to land, including clean energy developers, mining companies, and oil and gas operators, as the listed locations cover real estate across the country and, at times, in areas of potential development, including federal public lands. It might not be obvious to project proponents that a foreign investment transaction could have national security risks, but in the “covered real estate” areas, the risk is based on the location rather than the type of business. Indeed, in May of 2024, President Biden issued the first real estate-related divestment order based on CFIUS’s recommendation after a Chinese cloud computing company purchased land within one mile of a U.S. Air Force Base. In that case, the transacting parties did not notify CFIUS; instead, CFIUS received a tip from the public regarding the transaction and investigated, then required the parties to file a notice and ultimately recommended that the President order divestment. This serves as an example of the possible consequences of failing to be cognizant of CFIUS’s reach, which may become increasingly relevant to real estate developers across the country as the nation approaches a change in presidential administration.
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