"Covered real estate transactions would include two main categories: (1) real estate “described by its relation to airports and maritime ports”, and (2) real estate “described by its relation to U.S. military installations and other facilities or properties of the U.S. Government that are sensitive for national security reasons.” Real estate transactions are not subject to the mandatory declaration requirement but the proposed rules would allow the submission of voluntary short-form declarations for real estate transactions...
The proposed regulations create new country specifications for covered investments including a new term, “excepted foreign state.”
“Excepted foreign states” are countries “included in a defined group of eligible foreign states, which will be separately published on the Department of Treasury website” and which have been determined by a super-majority of CFIUS member agencies, based on “factors that will be made available on the Department of Treasury website,” to have established “a robust process to assess foreign investments for national security risks and to facilitate coordination with the United States on matters relating to investment security.” (Proposed rules to be codified at 31 CFR part 800 at p.25).
The proposed regulation also contains a definition of “excepted investor” that ties the exemption to ultimate beneficial ownership, looking at such factors as place of incorporation and corporate nationality, and requires substantial connections to the exempt location."
Yesterday’s foreign investment proposals from the committee on Foreign Investment in the U.S. (CFIUS) provide some insight into areas of government concern. They suggest that the U.S. Government has set its sights on reviewing more real estate transactions and taking a more tailored approach to data-centric businesses, while considering country-specific exemptions for the first time. Because of the broad reach of this initial (and as yet incomplete) package of proposals, we may see significant stakeholder comments before these regulations are finalized. The much-anticipated proposed regulations will implement FIRRMA, the Foreign Investment Risk Review Modernization Act of 2018, last fall’s CFIUS reform legislation. At over 300 pages in length, this initial package of proposed regulations was released on Tuesday, September 17, 2019. Comments are due on October 17, 2019.