Technical Advisory #360

November 13, 2024
Big I Exempts Agents from Corporate Transparency Act

TA #360

Big I Exempts Agents from Corporate Transparency Act

November 13, 2024

The Corporate Transparency Act (CTA), effective January 1, 2024, introduced a new federal reporting requirement mandating most small businesses to submit Beneficial Ownership Information (BOI) reports to the Financial Crimes Enforcement Network (FinCEN).

Originally, this provision would have included insurance agencies, imposing an estimated $22.7 billion compliance cost on millions of small businesses in its first year. However, through effective lobbying efforts, the Big “I” secured an exemption for independent insurance agents and brokers, arguing that they already provide ownership information to state regulators, making federal reporting duplicative and burdensome.

This exemption means that independent insurance agencies with fewer than 20 employees are not required to file annual BOI reports, avoiding costly compliance fees, potential civil penalties of up to $10,000, and criminal penalties for non-compliance. Under Title 31 CFR § 1010.380, state-licensed insurance producers with a physical office in the U.S. are exempt from this new requirement. This exemption allows agents to focus on their businesses without the added administrative and financial burdens of federal reporting compliance.

IIABL has received a number of inquiries from member agencies asking whether they need to report to the federal government under the Beneficial Ownership Information Reports.

We are pleased to report that the Big I successfully lobbied to exempt independent agents from this burdensome requirement.

The Corporate Transparency Act (CTA), which was passed as part of the National Defense Authorization Act in 2021, contains a provision that creates a new federal reporting requirement for most small businesses. The CTA went into effect on Jan. 1, 2024.

This new burdensome requirement was originally meant to cover nearly all small businesses, including insurance agents. However, the Big “I” was successful in securing an exemption for independent agents and brokers by showing that insurance producers already provide this beneficial ownership information to state regulators and that the additional burden of providing it to the federal government would be duplicative and unnecessary.

Data released by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and the National Federation of Independent Business (NFIB) estimate that complying with the CTA will cost a staggering $22.7 billion in its first year and an additional $5.6 billion per year moving forward, affecting 32.6 million small businesses in the first year and five to six million small businesses every year thereafter.

Also, according to FinCEN, the estimated total time for filing the Beneficial Ownership Information (BOI) reports can take up to 11 hours for a “complex structure” and about six hours for an “intermediate structure.” With potential civil and criminal penalties for noncompliance, many small businesses will retain outside legal and accounting counsel, which FinCEN acknowledges will cost up to $2,615 per entity in the first year. Further, the penalties for failure to comply with these reporting requirements are severe, with civil penalties of up to $10,000 and criminal penalties of up to two years in prison.

The Big “I” was the only producer group that advocated on behalf of agents and brokers to exclude them from this new onerous requirement. Without this exemption, the beneficial ownership provision would have required agencies with fewer than 20 employees to file new reports on their beneficial ownership with FinCEN. Agencies would have had to comply with the new requirement annually starting within two years of the law’s enactment for existing businesses or upon the incorporation of a new business.

You can view the actual § 1010.380 Reports of beneficial ownership information at the following link:
Code of Federal Regulation Title 31 CFR 1010.380

Section (C)(2) lists exemptions from the beneficial ownership reporting requirements. Exemption (xiii) exempts insurance agents.

(2) Exemptions. Notwithstanding paragraph (c)(1) of this section, the term “reporting company” does not include:
(xiii) State-licensed insurance producer. Any entity that:
(A) 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; and
(B) Has an operating presence at a physical office within the United States.

  1. Confirm Exemption Eligibility: Ensure your agency qualifies for the exemption by verifying that you:
  • Are a state-licensed insurance producer.
  • Have a physical office location within the United States.

2. No Additional Reporting Required: If your agency meets the exemption criteria, no further action is needed to comply with the Beneficial Ownership Information (BOI) reporting requirements.

3. Maintain Documentation: Keep records of your state license and physical office location readily available in case of any questions or audits regarding the exemption.

The information provided by IIABL is intended for educational and informational purposes only. IIABL does not make any warranty or representation, express or implied, with respect to the accuracy, completeness or usefulness of the information provided. Information provided represents the views of one or more experienced insurance professionals and is not a recommendation that a particular course of action be followed.  Please note that this information is not legal advice upon which you should rely. Please seek any legal opinion you may need from a qualified attorney. IIABL is not liable for any liability or damage which may result from the use of this information.