The Corporate Transparency Act – It’s Back (Maybe)
You may remember (and possibly still be scarred from) the on again, off again reporting requirements for the Beneficial Ownership Information (BOI) report under the Corporate Transparency Act (CTA). While the BOI reporting requirements were put on ice in March of this year (at least for now), the Residential Real Estate (RRE) reporting requirements are upon us. The RRE report is a new form required by FinCEN under the CTA in relation to the transfer of residential real estate.
A reportable transfer is a non-financed transfer to a transferee entity or transferee trust of an ownership interest in residential real property. To be considered residential real property, it must fall into one of the following categories:
It is real property located in the United States that includes a structure designed principally for occupancy by one to four families;
It is land in the United States on which the transferee intends to build a structure designed principally for occupancy by one to four families;
It is a unit designed principally for occupancy by one to four families within a structure on land located in the United States; and/or
It is a share in a cooperative housing corporation for which the underlying property is located on land within the United States.
A transfer of residential real property is any transfer of an ownership interest in the residential real property that happens through a deed or if it is of an interest in a cooperative housing corporation, through the transfer of stock, shares, membership, a certificate, or other contractual agreement evidencing ownership. This definition includes the purchase of residential real property for any amount or for which no consideration is exchanged, such as a gift.
As is usually the case, you may have a financed transfer that could still be a “non-financed transfer” under the rules. A non-financed transfer only includes a transfer that does not involve an extension of credit to all transferees that is both: (1) secured by the transferred property; and (2) extended by a financial institution subject to Anti-Money Laundering (AML) program requirements and Suspicious Activity Report (SAR) reporting obligations. Transfers that are financed by a lender without an obligation to maintain an AML/CFT (Combating the Financing of Terrorism) program and a requirement to file SARs are treated under the final rule as non-financed transfers that potentially must be reported.
There are some transfers that do not require reporting. Some of these include:
A transfer that is a grant, transfer, or revocation of an easement.
A transfer resulting from the death of an individual, whether pursuant to the terms of a will, the terms of a trust, the operation of law (such as transfers resulting from intestate succession, surviving joint owners, and transfer-on-death deeds), or by contractual provision (such as transfers resulting from beneficiary designations).
A transfer incident to divorce or dissolution of a marriage or civil union (such as transfers required by a divorce settlement agreement).
A transfer made to a bankruptcy estate.
A transfer supervised by a court in the United States.
A transfer for no consideration made by an individual, either alone or with their spouse, to a trust of which that individual, that individual’s spouse, or both, are the settlors or grantors.
A transfer to a qualified intermediary for the purposes of a like-kind exchange for purposes of Section 1031 of the Internal Revenue Code.
A transfer for which there is no reporting person.
This is not necessarily a comprehensive list of all transfers that are not reportable, and persons that could be reporting persons should most definitely evaluate the specific facts of each individual transfer to determine whether it constitutes a reportable transfer under the rule. If at least one of the transferees in a given transfer is a transferee entity or transferee trust that does not fall under an exception, the transfer is reportable.
Unlike the BOI reports, the reporting person isn’t the party to the transaction. The reporting person follows a cascading priority of individuals that assisted in the transaction. Unless a designation agreement is used, the reporting cascade will be used to determine the reporting person for the transfer. In order, the reporting cascade is as follows:
The person listed as the closing or settlement agent on the closing or settlement statement;
If no person described above is involved, the person that prepares the closing or settlement statement;
If no person described above is involved, the person that files with the recordation office the deed or other instrument that transfers ownership of the residential real property;
If no person described above is involved, the person that underwrites an owner’s title insurance policy for the transferee with respect to the transferred residential real property, such as a title insurance company;
If no person described above is involved, the person that disburses in any form, including from an escrow account, trust account, or lawyers’ trust account, the greatest amount of funds in connection with the residential real property transfer;
If no person described above is involved, the person that provides an evaluation of the status of the title; or
If no person described above is involved, the person that prepares the deed or, if no deed is involved, any other legal instrument that transfers ownership of the residential real property, including, with respect to shares in a cooperative housing corporation, the person who prepares the stock certificate.
The RRE report is due by the last day of the month following the month in which the date of closing occurred or 30 days after the date of closing, whichever is later. Originally the requirement to file RRE reports was scheduled to commence on December 1, 2025 but that date has now been moved to March 1, 2026 (sound familiar).
Just like the BOI report, the failure to file a report can bring with it a $500 per day fine up to $10,000 and potentially prison time up to ten years. If you are a person involved in real estate transactions, there is so much more to know about these new rules than can be included here. You can read more details about the RRE, how to file the report, and what information is required at www.fincen.gov/rre.
Please remember, this is not intended to be legal advice. Even in the age of AI, never hesitate to seek the advice of a competent and experienced attorney to help with your unique legal issues. General advice can generally land you in trouble.
Be safe out there.
This post is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.