As we have previously written about, Final CFIUS Regulations Significantly Expand Jurisdiction, the Foreign Investment Risk Review and Modernization Act of 2018 (FIRRMA) and the regulations thereunder expand the scope of transactions that are subject to the US Committee on Foreign Investment in the United States (CFIUS) review to include non-controlling foreign investments in certain US businesses and certain real estate transactions. FIRRMA also authorized CFIUS to impose filing fees not to exceed the lesser of 1% of the transaction value or $300,000.
Filing Fees Apply to Transactions Submitted Using Traditional Notification Filing Process
For the first time in its history, CFIUS plans to require the payment of filing fees in connection with the submission of notifications for covered foreign investment transactions (the “Proposed Rule”). According to the Proposed Rule, which was published today in the Federal Register, the fees would apply to all transactions for which a full notification is submitted, including both controlling and non-controlling foreign investments in certain US businesses and real estate transactions, and regardless of whether the transaction involves mandatory filings or voluntary filings. Transactions submitted via the short-form declaration filing process recently implemented by CFIUS would not be subject to filing fees; however, a filing fee would be assessed for any full notifications requested by CFIUS in connection with the declaration process.
Amount of Filing Fees Tied to Value of Transaction
The Proposed Rule adopts the following fee structure:
|Value of Transaction||Fee Amount|
|Less Than $500,000||No Fee|
|$500,000 – Less Than $5,000,000||$750|
|$5,000,000 – $50,000,000||$7,500|
|$50,000,000 – Less Than $250,000,000||$75,000|
|$250,000,000 – Less Than $750,000,000||$150,000|
|$750,000,000 or Greater||$300,000|
In determining the “value of the transaction”, CFIUS anticipates that the value of the transaction will generally be the total value of all consideration that has been or will be paid in the context of the transaction by the foreign person (including cash, assets, ownership interests, forgiveness of debt, etc.). As part of the submission to CFIUS, parties would be required to provide the value of the transaction, the methodology used to determine the value of the transaction, and the applicable fee. If CFIUS determines that the filing fee paid by the parties was insufficient, CFIUS has the authority to reject the filing. Finally, if CFIUS determines that the notified transaction was not a “covered” transaction under CFIUS, then the Proposed Rule states that the Treasury Department intends to refund the filing fee.
Comments to the Proposed Rule are being accepted until April 8, 2020, and it is unlikely that final regulations implementing the proposed filing fee will be effective any time soon. However, when finalized, the filing fees could have a significant impact on a wide range of foreign investors. If you have questions about this alert and its applicability, please contact Roger Wells, Tom Worthington or Rachel Meyer.