Insurance Producers Are Exempt from BOI Reporting
Since January 1, 2024, the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of the Treasury has been accepting beneficial ownership information (“BOI”) required to be reported by certain “reporting companies” and their beneficial owner or owners pursuant to the Corporate Transparency Act (“CTA”).[1] Reporting companies include basically every corporation, limited liability company, or other similar entity that is formed or registered to do business in the United States, unless an exemption applies.[2] There are 23 exemptions from the definition of “reporting company,” including one for an entity that “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.”[3] Neither the CTA nor its implementing regulations adopted by FinCEN define the term “insurance producer,” but another federal statute defines “insurance producer” to mean “an individual who is required under State law to be licensed in order to sell, solicit, or negotiate insurance coverage.”[4] That is consistent with the general understanding that the terms “insurance producer” and “insurance agent” are interchangeable.[5]
Other than being licensed by a state and subject to the insurance commissioner’s supervision, the only additional requirement for the insurance producer exemption is that the entity have “an operating presence at a physical office within the United States.”[6] This means that the entity “regularly conducts its business at a physical location in the United States that the entity owns or leases and that is physically distinct from the place of business of any other unaffiliated entity.”[7] FinCEN dropped a proposed requirement limiting the insurance producer’s physical offices to “not the place of residence of any individual,” so a licensed insurance producer that operates out of a home office can still qualify for the exemption.[8]
[2] See id. § 5336(a)(11) (definition of “reporting company”).
[3] Id. § 5336(a)(11)(B)(xiii)(I); accord 31 C.F.R. § 1010.380(c)(2)(xiii)(A).
[4] 12 U.S.C. § 3423(a)(1)(J).
[5] See, e.g., Cal. Ins. Code § 1621 (defining an “insurance agent” as “a person who transacts insurance, other than life, disability, or health insurance, on behalf of an admitted insurance company”). Under California law (as in other states), a person cannot “solicit, negotiate, or effect contracts of insurance … unless the person holds a valid license from the” insurance commissioner. Id. § 1631. Corporations and limited liability companies may be licensed. See id. §§ 1656.1 (corporations), 1656.2 (limited liability companies). In their applications, corporations and limited liability companies must provide the names and addresses of stockholders or members owning 10 percent or more of the corporation’s stock or company’s membership interests. See id. §§ 1656.1(a), 1656.2(a).
[6] 31 U.S.C. § 5336(a)(11)(B)(xiii)(iI); accord 31 C.F.R. § 1010.380(c)(2)(xiii)(B).
[7] 31 C.F.R. § 1010.380(f)(6).
[8] See FinCEN, Beneficial Ownership Information Reporting Requirements, 87 FR 59,498, 59,541 (Sept. 30, 2022).