17 September 2019 - Article
by Jeanne R. Solomon and Mark Tice This week's Corporate news roundup includes information regarding the widening geographic net cast by FinCEN's review of all-cash real estate purchases in NYC, Florida, California and Texas. The news roundup also includes summaries of the CFTC's proposed expansion of registration exemptions for certain asset managers acting as intermediaries for non-U.S. persons, and temporary IRS rules permitting partnerships to opt in early to a new partnership tax audit regime: IRS PERMITS EARLY APPLICATION OF NEW PARTNERSHIP AUDIT RULES UNDER BIPARTISAN BUDGET ACT OF 2015 The IRS has released temporary regulations, effective August 5, 2016, that permit partnerships to opt in early to the new IRS partnership tax audit regime enacted in November 2015 under the Bipartisan Budget Act of 2015. The 2015 audit regime generally provides for tax liability to be assessed at the partnership (instead of the partner) level for tax years beginning on or after January 1, 2018. The new rules apply to partnerships with over 100 partners (or to partnerships with fewer partners if any partner is a trust or partnership), with smaller partnerships being eligible to elect out of the new rules by making an annual election and notifying their partners thereof. Under the recent temporary regulations, partnerships (and limited liability companies taxed as partnerships) that are notified of an upcoming audit may elect to have the 2015 audit regime apply to any partnership taxable year beginning after November 2, 2015. Partnerships that choose to make such election will not be permitted to revoke the election without IRS consent. For more information, click here. FINCEN BROADENS ITS SCRUTINY OF ALL-CASH REAL ESTATE PURCHASES TO ADDITIONAL LOCATIONS IN NYC, FLORIDA, CALIFORNIA AND TEXAS The Financial Crimes Enforcement Network (FinCEN) recently expanded the geographic scope of an earlier order (a Geographic Target Order, or GTO) that requires U.S. title insurance companies to identify the individuals behind “shell companies” that are used to conduct all-cash real estate purchases. FinCEN's original January 2016 GTO was directed at title insurance companies involved in all-cash real estate transactions in Manhattan and Miami, with purchase prices in excess of $3 million and $1 million, respectively. The original GTO was introduced to address concerns that individuals engaged in money laundering schemes may use limited liability companies or other “opaque” structures to hide their ill-gotten funds in the luxury real estate market. FinCEN justified its recent expansion of the GTO to cover additional geographic areas by citing the original GTO's success in helping law enforcement identify possible criminal activity by the beneficial owners of shell companies. The GTO now targets all-cash real estate transactions in (1) all five boroughs of New York City, (2) Miami-Dade, Broward and Palm Beach Counties, Florida, (3) Los Angeles, San Francisco, San Mateo, Santa Clara and San Diego Counties, California and (4) Bexar County, Texas. For more information, click here. CFTC PROPOSES EXPANDED REGISTRATION EXEMPTION FOR NON-U.S. INTERMEDIARIES The Commodity Futures Trading Commission (CFTC) recently proposed amendments to broaden registration exemptions applicable to certain non-U.S. asset managers that act as intermediaries for persons located outside the U.S. Current CFTC rules exempt such “foreign intermediaries,” including futures commission merchants (FCM), introducing brokers (IB), commodity trading advisers (CTA) and commodity pool operators (CPO), from registration in certain instances where they act in connection with bilateral commodity transactions or transactions that are subject to the rules of a designated contract market (DCM) or a swap execution facility (SEF). To be eligible for the current exemption, (1) an intermediary must be located outside the U.S., (2) such foreign intermediary must act only on behalf of persons located outside the U.S. and (3) the relevant transaction must be submitted for clearing through a U.S.-registered FCM. Among other things, the CFTC's proposed amendments would eliminate the condition that a transaction be cleared through a U.S.-registered FCM. The CFTC indicated that the proposed change is intended to acknowledge that not all commodity interest transactions involving non-U.S. persons are subject to a clearing requirement. For more information, click here. To subscribe to our weekly Corporate e-newsletter and receive future news updates, please click here. If you would like to read up on previously published Corporate-related news, please visit our e-newsletter archive by clicking here.