Earlier this week, the Treasury Department took a break from firing its cash howitzer just long enough to implement an interim rule requiring those entities that submit notice of a proposed transaction to CFIUS to pay a filing fee for the privilege. The fee goes into effect on May 1st, and the fee amount is based on the size of the transaction. No fee is required for deals with a value of less than $500K, while deals with a value of $750 million or more will have to pay a fee of $150K.
If this all seems kind of sudden, it is. As a Dorsey & Whitney memo points out, the Treasury’s rulemaking process here leaves much to be desired:
On March 9, 2020, CFIUS published a notice of proposed rulemaking to establish filing fees for “covered transactions” under the Regulations Pertaining to Certain Investments in the United States by Foreign Persons found in 31 CFR Part 800 (“Part 800”) and for “covered real estate transactions” under the Regulations Pertaining to Certain Transactions by Foreign Persons Involving Real Estate in the United States (“Part 802”). The proposed rule created a new Subpart K to Part 800 and 802.
Under the proposed rule, CFIUS was accepting comments on the proposed filing fees only until April 3, 2020. CFIUS appears to have received only five comment letters. Importantly, the timing of the release of the proposed rule and the date on which comments were originally due coincided with the time that virtually all U.S. companies were very distracted by the adverse effects of the COVID-19 pandemic. CFIUS itself acknowledged the impact of the COVID-19 pandemic on public comments and so has extended the new comment period until June 1, 2020.
Despite requesting additional comments, given the growing volume of CFIUS’s work and the added government resources that must be devoted to that work, on April 27, CFIUS determined that implementing filing fees in line with the 2018 FIRRMA authorization was appropriate at this time.
Not for nothing, but Uncle Sam can probably use the cash right about now, too. The fee requirement only applies to formal written notices filed with CFIUS and not to the mandatory declarations created under FIRRMA. But, the memo points out that if the parties to a mandatory declaration ultimately file a formal written notice, they would be required to pay the applicable filing fee.
-John Jenkins, DealLawyers.com May 1, 2020