On April 28, 2020, the Treasury Department (Treasury) issued an interim final rule, effective May 1, regarding filing fees for submissions to the Committee on Foreign Investment in the United States (CFIUS). The rule makes few changes to the proposal that Treasury published on March 9. The filing fee rule is an "interim" rule in that CFIUS is accepting comments until June 1, 2020, notwithstanding the May 1 effective date.
Under the new rule, filing fees will be applicable to long-form CFIUS filings (known as "notices") but not short-form filings (known as "declarations"). Notices filed with CFIUS on or after May 1, 2020 will be required to pay a fee on a sliding scale according to the size of the transaction. However, as filing fees will not apply to any declaration, many transactions may be able to proceed through the CFIUS process without payment.
Background
The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) allows CFIUS to collect fees for "each covered transaction for which a written notice is submitted to the Committee." The law limits fees by the value of the underlying transaction and gives CFIUS the statutory authority to charge parties up $300,000 or 1 percent of the transaction value, whichever is less.
As we have noted previously, CFIUS has been increasing its enforcement activities, in addition to expanding its jurisdiction over non-controlling investments into certain U.S. companies. Accordingly, the interim final rule notes that, "[g]iven the growing volume of work and resources devoted to CFIUS, the Treasury Department determined that implementing filing fees is appropriate at this time."
The interim final rule can be divided into two parts—fee bands and how to value a transaction for purposes of determining the fee category.
Fee Bands
The interim final rule maintains the same fee structure proposed in March. The rule imposes a filing fee for voluntary notices—i.e., long-form CFIUS filings—submitted with respect to both "covered transactions" and "covered real estate transactions." As was the case in the proposed rule, filing fees for covered transactions and covered real estate transactions are keyed to the value of the transaction.
Declarations (short-form CFIUS filings) remain exempt from fees, as are any notices specifically compelled by CFIUS. Parties generally have the option to submit a declaration in lieu of a notice. Accordingly, parties still have the option to make a CFIUS filing without paying a fee. However, if the transaction cannot be satisfactorily resolved via the declaration, the parties may need to file a notice subsequent to filing a declaration (and may have to pay a fee in connection with that notice). Parties to transactions that present a high degree of national security risk (those likely to be requested to file in notice form) may accordingly still wish to begin by filing a notice in order to save the time required to proceed through the declaration process.
Filing fees, owed jointly by the parties to the transaction (and allocated in whatever manner the parties choose), are established in bands as indicated below. While the upper end of the fee range is a sizeable $300,000, CFIUS notes that in no case will any fee exceed 0.15 percent of the value of the transaction.
| Minimum Value |
Maximum Value |
Fee Assessed |
| - |
Less than $500,000 |
No fee |
| Equal to or greater than $500,000 |
Less than $5,000,000 |
$750 |
| Equal to or greater than $5,000,000 |
Less than $50,000,000 |
$7,500 |
| Equal to or greater than $50,000,000 |
Less than $250,000,000 |
$75,000 |
| Equal to or greater than $250,000,000 |
Less than $750,000,000 |
$150,000 |
| Equal to or greater than $750,000,000 |
|
$300,000 |
Valuation
Generally, the rules determine the value of the transaction by collating "all consideration that has been or will be provided in the context of the transaction by or on behalf of the foreign person that is a party to the transaction." This includes "cash, assets, shares or other ownership interests, debt forgiveness, or services or other in-kind consideration."
Some of the valuation rules are very granular. For example, when a transaction includes the conversion of a previously acquired contingent equity interest, the transaction value includes what was paid to initially acquire the contingent equity interest, in addition to any other consideration to be paid in connection with the conversion. However, if the conversion will not occur imminently, and the conditions for the conversion are not within the control of the acquirer, and the consideration for the contingent interest cannot be reasonably determined, then the conversion consideration is not included in the value of the transaction.
Pending Changes
Treasury noted that COVID-19 created "unique challenges" for those seeking to comment on the fee proposal that Treasury published in March. In recognition of those challenges, Treasury has extended the comment period from April 29 to June 1, 2020, notwithstanding the May 1 effective date of the fee rule.
Further, Treasury is specifically requesting comment on alternative approaches to valuing a joint venture transaction. Treasury has asked whether a joint venture valuation should be based on the foreign person's proportional ownership, or the foreign person's contribution to the joint venture, or some other methodology.
