Are Insurance Producers Exempt From The Corporate Transparency Act?
There are 23 separate exemptions from the CTA's beneficial ownership reporting requirement. The exemptions are listed in order in FinCEN's Final Rule at 31 CFR 1010.380 and take effect on January 1, 2024.
CTA Exemptions Generally
In general, the CTA exempts companies that already report their beneficial ownership to the U.S. government under a separate legal framework. FinCEN's Final Rule addresses each exemption separately in subsection 1010.380(c)(2).
Exemption Number 13 - State-licensed insurance producer
Subsection 1010.380(c)(2)(xiii) of the Final Rule exempts:
(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.
This exemption will apply to an entity that is both (1) authorized by a State and subject to supervision by a state insurance commissioner or a similar official as an "insurance producer" and (2) has an operating presence at a physical office within the United States.
State-licensed Insurance Producer
An insurance producer is a person who sells insurance products, in contrast with an insurance company, which is an entity that buys and sells insurance contracts, taking on the risk of acting as the insurer. Before 1999, states had a variety of approaches to licensing insurance agents and brokers (both of which are generally defined as "producers").
According to the National Association of Insurance Commissioners, as of 2023, there are more than 2 million individuals and more than 236,000 business entities licensed as insurance producers in the United States. That organization's website explains that a provision in the Gramm-Leach-Bliley Act of 1999 encouraged states to adopt a uniform system of insurance producer regulation, and consequently, a vast majority of the states have either adopted a uniform system of licensure or participate in a reciprocity program so that producers licensed in one state can obtain reciprocal licenses in other states.
Operating Presence at a Physical Office within the United States
Section 1010.380(f)(6) of the Final Rule defines "operating presence at a physical office within the United States" to mean "that an entity regularly conducts its business at a physical location in the United States that the entity owns or leases and that is physically distinct from the place of business of any other unaffiliated entity."
Significantly, the definition of this phrase in an earlier Notice of Proposed Rulemaking would have prohibited a company from having an "operating presence" if its office was located in an individual's residence. That prohibition was expressly removed from the Final Rule. As a consequence, an insurance producer that is licensed under any state may be exempt if its "operating presence" is an office location or even a home office.