Filing Fees Are Here: CFIUS Establishes Fee Structure
Highlights
- Effective May 1, 2020, the Committee on Foreign Investment in the United States (CFIUS) will begin assessing filing fees on voluntary notices filed under 31 C.F.R. Parts 800 and 802.
- The CFIUS interim rule makes no substantive changes to the proposed rule's fee structure or amounts, inapplicability to mandatory declarations or to the requirement that the fee be transmitted before a formal written notice is accepted for review.
- The maximum fee remains $300,000 and is capped at 0.15 percent of the transaction's value.
- CFIUS is allowing public comment on the interim rule through June 1, 2020, to provide parties who were potentially delayed by the COVID-19 pandemic with an extended opportunity to comment. The comment period, however, does not delay the filing fees' effective date. All formal written notices, filed on or after May 1, 2020, must be accompanied by the requisite fee.
Effective May 1, 2020, the Committee on Foreign Investment in the United States (CFIUS) will begin assessing filing fees on voluntary written notices filed under 31 C.F.R. Parts 800 and 802.1 The rule impacts investors in a range of sectors, including federal, commercial and residential real estate, government contractors, private equity and other investment firms, telecommunications and others.
The CFIUS interim rule, published on April 29, 2020, implements Section 1723 of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), which allows CFIUS to impose and collect fees on certain filings.2 In substance, the interim rule largely adopts the proposed rule3 and, importantly, makes no changes to the proposed fee structure and amounts. (See Holland & Knight's previous alert, "CFIUS Publishes Proposed Rule on New Filing Fees," March 11, 2020.) The interim rule does, however, make several key clarifications.
CFIUS did not make any changes to the proposed fee structure and amounts, explaining that the figures are relatively small, especially when compared to the associated transaction values and what CFIUS expects parties to expend on accounting and legal fees to close the transaction. Ultimately, CFIUS does not see the fee amounts as prohibitive or detrimental to the flow of foreign investment into the United States and, in fact, emphasizes the significant value that parties gain if a "safe harbor" letter is issued. CFIUS, similarly, rejects modifying the proposed amounts for so-called "low-risk" investors, explaining that the Committee's level of analysis does not vary based on investors' origins and modification on such a basis would be inappropriate.4
CFIUS' key clarifications arise in two provisions: valuation and effective date.
Valuation
CFIUS explains that where more than one U.S. business contributes to a joint venture, valuation will be based on the collective value of each contributed U.S. business. CFIUS, however, is open to alternative valuation methods and asks for public comment on the existing methodology and proposes two alternatives for its consideration. (Comments may be submitted through June 1, 2020.5)
Likewise, CFIUS:
- clarifies that intangible assets (e.g., intellectual property), as well as non-U.S.-business operations, will be included when calculating total value6
- declines to make special accommodation for companies in specific industries or pre- or –low-revenue companies
- streamlines use of certain defined terms in the valuation provision
- clarifies that multiphase transactions will be valued on a per-phase basis, as reasonably determined at time of filing
- adds examples to illustrate valuation of transactions involving contingent equity interest
Effective Date
Most importantly, draft notices filed before May 1, 2020 will not toll the assessment of filing fees. That is, parties that file a formal written notice filed on or after May 1, 2020, will have to pay the appropriate filing fee, even if they filed a draft notice on or before April 30, 2020.
CFIUS Filing Fees
Filing fees effective May 1, 2020, depending on the value of the transaction:
|
Transaction Value |
Filing Fee |
|
Less than $500,000 |
No filing fee |
|
$500,000 to $5 million |
$750 |
|
$5 million to $50 million |
$7,500 |
|
$50 million to $250 million |
$75,000 |
|
$250 million to $750 million |
$150,000 |
|
$750 million and up |
$300,000 |
For assistance in submitting comments or for more information on the interim rule and how it could impact your company, contact the authors or another member of Holland & Knight's CFIUS and Industrial Security Team.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.
Notes
1 Filing Fees for Notices of Certain Investments in the United States by Foreign Persons and Certain Transactions by Foreign Persons Involving Real Estate in the United States, 85 Fed. Reg. 23736 (U.S. Department of the Treasury, April 29, 2020) (31 C.F.R. Parts 800 and 802).
2 FIRRMA amends Section 721 of the Defense Production Act of 1950 to allow imposition and collection of filing fees.
3 Specifically, the interim rule does not alter the proposed rule on the following topics: timing of payment, manner of payment, refunds, waiver, refilings and rejection of voluntary notices.
4 On that logic, it could be argued that CFIUS work does not vary based on the value of the transaction, which would favor having a fixed filing fee. However, such an approach would have a negative impact on smaller transactions.
5 Comments may be submitted electronically through Regulations.gov or by mail to U.S. Department of the Treasury, Attention: Laura Black, Director of Investment Security Policy and International Relations, 1500 Pennsylvania Avenue NW, Washington, DC 20220.
6 Specifically, CFIUS noted that the interim and proposed rules already made allowances for transactions where the value of the interest acquired is less than $5 million, although the value of the transaction overall is equal or greater than $5 million. In such circumstances, the filing fee will be $750.