Question from a Big I NY member: Was the exemption for licensed insurance producers under the Corporate Transparency Act limited to those agencies with less than twenty employees? There was a
Big I article that referenced this exemption threshold, but I could not find this threshold cited elsewhere. We have twenty-two employees so I am trying to determine if we should file a Beneficial Ownership Information report. Thanks.
Answer: The exemption applies to insurance producers of all sizes without regard to the number of employees.
I can see why you were confused. The article stated:
“However, the Big 'I' was successful in securing an exemption for independent agents and brokers by successfully arguing that insurance producers already provide this beneficial ownership information to state regulators and that the additional burden of providing it to the federal government would be duplicative and unnecessary. …
Without this exemption, the beneficial ownership provision would have required agencies with fewer than 20 employees to file new reports on their beneficial ownership with the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN)."
What Wyatt Stewart was saying was that, had Big I not succeeded in getting the exemption added, small agencies would have been subject to the requirements. This is because small businesses are the actual focus of the law.
Section 6402 of the Corporate Transparency Act states:
"It is the sense of Congress that—
(1) more than 2,000,000 corporations and limited liability companies are being formed under the laws of the States each year;
(2) most or all States do not require information about the beneficial owners of the corporations, limited liability companies, or other similar entities formed under the laws of the State;
(3) malign actors seek to conceal their ownership of corporations, limited liability companies, or other similar entities in the United States to facilitate illicit activity, including money laundering, the financing of terrorism, proliferation financing, serious tax fraud, human and drug trafficking, counterfeiting, piracy, securities fraud, financial fraud, and acts of foreign corruption, harming the national security interests of the United States and allies of the United States;
(4) money launderers and others involved in commercial activity intentionally conduct transactions through corporate structures in order to evade detection, and may layer such structures, much like Russian nesting ''Matryoshka'' dolls, across various secretive jurisdictions such that each time an investigator obtains ownership records for a domestic or foreign entity, the newly identified entity is yet another corporate entity, necessitating a repeat of the same process; …"
It appears Congress was concerned with terrorist groups and others forming seemingly legitimate businesses to hide their real activities. The law, which can be found in
United States Code, Title 31, Section 5336, states:
"(a) DEFINITIONS.—In this section: …
(11) REPORTING COMPANY.—The term 'reporting company'—
(A) means a corporation, limited liability company, or other similar entity that is—
(i) created by the filing of a document with a secretary of state or a similar office under the law of a State or Indian Tribe; or
(ii) formed under the law of a foreign country and registered to do business in the United States by the filing of a document with a secretary of state or a similar office under the laws of a State or Indian Tribe; and
(B) does not include—
(xiii) an entity that—
(I) is an insurance producer that is authorized by a State and subject to supervision by the insurance commissioner or a similar official or agency of a State; and
(II) has an operating presence at a physical office within the United States; …
(xxi) any entity that—
(I) employs more than 20 employees on a full-time basis in the United States;
(II) 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—
(aa) other entities owned by the entity; and
(bb) other entities through which the entity operates; and
(III) has an operating presence at a physical office within the United States; …
(b) BENEFICIAL OWNERSHIP INFORMATION REPORTING.—
(1) REPORTING.—
(A) In general.—In accordance with regulations prescribed by the Secretary of the Treasury, each
reporting company shall submit to FinCEN a report that contains the information described in paragraph (2).
(2) REQUIRED INFORMATION.—
(A) In general.—In accordance with regulations prescribed by the Secretary of the Treasury, a report delivered under paragraph (1) shall, except as provided in subparagraph (B), identify each beneficial owner of the applicable reporting company and each applicant with respect to that reporting company by—
(i) full legal name;
(ii) date of birth;
(iii) current, as of the date on which the report is delivered, residential or business street address; and
(iv)(I) unique identifying number from an acceptable identification document; or
(II) FinCEN identifier in accordance with requirements in paragraph (3)."
The important thing to note is that Congress created twenty-four exceptions to the definition of “reporting company." One of those exceptions is for insurance producers. Another one is for entities that have more than twenty full-time employees. If Congress had not added the exemption in (a)(11)(B)(xiii), insurance agencies would have been eligible for an exemption
only if they qualified under (a)(11)(B)(xxi) – that is, if they had more than twenty full-time employees (your agency would have qualified under that exception.) Fortunately, Big I successfully lobbied for the insurance producer exception. Since an entity described by (a)(11)(B)(xiii) is not a reporting company, it is not bound by the reporting requirement in (b). Neither is an entity such as yours that has more than twenty full-time employees.
For what it's worth, the
U.S. Treasury Department announced on March 2, 2025 that it will not enforce the CTA against U.S. citizens or domestic reporting companies or their beneficial owners. Organized crime and domestic terrorist groups no longer have anything to fear from this law.