On April 29, 2020, the US Treasury Department published an interim rule establishing fees for parties filing a formal written notice of a transaction for review by the Committee on Foreign Investment in the United States (CFIUS). The new filing fee requirements take effect on May 1, 2020. The interim rule largely adopts the provisions of the proposed rule the US Treasury Department issued in March, which we described in detail here, with changes mostly providing additional clarification on how to determine transaction value for purposes of calculating the appropriate fee. Any public comments on the interim rule must be submitted by June 1, 2020. The White & Case CFIUS FIRRMA Tool will be updated to provide users with guidance in determining filing fees.
Filing fees are calculated pursuant to a set schedule (provided below) and apply to formal written notices filed under CFIUS’s investment regulations or its real estate regulations. This includes situations in which a formal written notice is filed with respect to a transaction following CFIUS’s review of a declaration pertaining to the same transaction (for example, cases in which CFIUS responds to a declaration by requesting a notice be submitted). Filing fees would not be required, however, for declarations or agency notices (that is, notices unilaterally initiated by a CFIUS member).
The interim rule discusses the public comments that were received in response to the proposed rule and retains most of the substantive provisions of the original proposed rule. As noted above, the changes made by the interim rule are mostly to clarify how transaction value is calculated for purposes of determining the appropriate fee, in particular:
- Intangible Assets: The interim rule maintains the provisions in the proposed rule whereby, in most cases, the “value of a transaction” will be the total value of all consideration that has been or will be paid in the context of the transaction by or on behalf of the foreign person that is a party to the transaction. The interim rule clarifies that this includes intangible assets, in whatever form.
- Joint Venture Transactions: The interim rule includes some clarifying and technical edits to account for the possibility that more than one US business might be contributed to a joint venture, in which case the value of the transaction is the collective value of each US business contributed. The notice states that the US Treasury Department “is considering, and in particular welcomes comment on, alternative approaches to valuing a joint venture transaction.”
- Multiple-phase transactions and transactions involving contingent equity interests: The interim rule includes edits made to clarify the treatment of multiple-phase transactions and transactions involving contingent equity interest. In a multiple-phase transaction, the value of the transaction includes the total value of each phase. For contingent equity interests, the interim rule clarifies that the value of the transaction includes the consideration that was paid to acquire the contingent equity interest and, in certain circumstances, any other consideration paid or to be paid in connection with the conversion.
The interim rule does not make any changes to the fee structure or amounts contemplated in the proposed rule, which are generally based on the value of the transaction (rather than the value of the US business itself) as follows:
|$500,000 – <$5,000,000
≥$5,000,000 but the value of the interest acquired in the US business is <$5,000,000
|$5,000,000 – <$50,000,000
|$50,000,000 – <$250,000,000
|$250,000,000 – <$750,000,000
Filing fees take effect for formal written notices filed with CFIUS on or after May 1, 2020. Parties that have filed a draft written notice prior to May 1, 2020, but file a formal written notice on or after May 1, 2020, will be required to pay the filing fee.