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Treasury Continues to Target U.S. Real Estate Transactions by Ken Vitek, CPA

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Posted on December 05, 2019 by Ken Vitek

In November 2019, the Financial Crimes Enforcement Network (FinCEN) strengthened its efforts to combat money laundering by reissuing its Geographic Targeting Order (GTO) program for U.S. real estate transactions.

Under the renewed GTO, which is extended through May 9, 2020, title insurance companies must collect and report the identities of certain beneficial owners behind holding companies and legal business entities that purchase residential real estate above a certain value without a bank loan or other form of third-party financing. The GTO covers property that is valued above $300,000 and that is located in any of the following 12 major U.S. metropolitan areas (including surrounding counties):

 

For purposes of the GTO, a “beneficial owner” is an individual who, directly or indirectly, owns 25 percent or more of an equity interest in a legal entity that purchases qualifying real estate. “Legal businesses entities” may include privately held corporations, limited liability companies (LLCs), partnership or other similar entities that are not listed or traded on the public equity markets. The forms of payment that are covered by the latest GTO as reportable transactions are those that involve cash, cashier’s checks, certified checks, traveler’s checks, personal or business checks, money orders, funds transfers or virtual currency.

FinCen first introduced the GTO program as a temporary measure in 2016. The agency has since renewed the program multiple times, expanding the geographic reporting area and reducing the dollar value threshold to cover a wider net of potentially illicit transactions.

As foreign capital continues to flow to the U.S., foreign investors should understand all the potential structures available to them and their related exposure to the various U.S. tax regimes. Since there is no optimal structure that works well in all situations, investors must consider which option fits best for their particular circumstances and objectives.

About the Author: Ken Vitek, CPA, is a director of International Tax Services with Berkowitz Pollack Brant, where he provides income and estate tax planning and compliance services to high-net-worth families and closely held businesses with an international presence. He can be reached at the CPA firm’s Miami office at (305) 379-7000 or at info@bpbcpa.com.

 

Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.