How to Identify Excluded Transferee Entities and Trusts Under the FinCEN Residential Real Estate Reporting Rule

The effective date of the FinCEN Residential Real Estate Reporting Rule (December 1, 2025) is fast approaching.  To prepare, one of the most nuanced and difficult aspects of compliance has come into focus:

How do you know when a transferee entity or transferee trust is excluded from reporting?

Many attorneys, settlement agents, title agents, and escrow officers across the country will need to answer this question. It’s a critical issue because the rule specifically exempts certain transferee entities and trusts from triggering a filing obligation — but determining whether those exclusions apply is not always straightforward.

In this post, we’ll break down:

• What the rule says about excluded transferees.
• Why these exclusions create challenges for real-world closings.
• How to handle these situations in practice.
• How RRE Report can help you navigate these gray areas.

What the Rule Says: Certain Transferees Are Excluded

The FinCEN rule generally requires the reporting person — the professional conducting the settlement — to file a report when residential real estate is transferred to a legal entity (like an LLC or corporation) or a trust.

However, the rule excludes certain entities and trusts from the reporting requirement.

Why? Because some entities and trusts are already highly regulated and transparent, and FinCEN has determined they pose lower risks of money laundering or illicit finance.

For example, the rule excludes transferee entities that are:

• Publicly traded companies registered under Section 12 of the Securities Exchange Act.
• Entities already subject to robust federal or state regulation and reporting.
• Certain large operating companies that meet specific employee and revenue thresholds.
• Certain exempt trusts, such as pension trusts or those regulated under ERISA.

These exclusions reflect a key policy choice: focus resources on higher-risk entities and avoid burdening well-regulated or transparent organizations.

Why These Exclusions Are Challenging in Practice

In theory, these exclusions make sense. But in practice, they create significant challenges for the reporting person at the closing table, who has to make a timely, correct determination about whether an exclusion applies.

Here are some of the reasons this is harder than it looks:

1️⃣ The Burden of Determination Falls on You

FinCEN puts the responsibility on the reporting person — not the buyer or their representatives — to determine whether a transferee entity or trust qualifies for an exclusion.

You cannot simply take the buyer’s word for it; you are expected to perform reasonable due diligence and make an informed judgment based on the information provided.

2️⃣ Exclusions Require Specific Documentation

Each type of excluded entity or trust has specific criteria it must meet. For example:

• A publicly traded company must demonstrate it is registered under Section 12 of the Securities Exchange Act.
• A bank, credit union, or depository institution holding company must meet the requirements set out in the regulations.
• A broker or dealer in securities is exempt if it meets the definition in 31 CFR 1010.380(c)(2)(vii).
• A money service business licensed by FinCEN is exempt if it meets the definition in 31 CFR 1010.380(c)(2)(vi).

These are not just labels — they are specific legal statuses that must be documented appropriately.

3️⃣ Buyers Don’t Always Know — Or Disclose — Their Status Clearly

In many cases, the buyer’s representative may not understand the nuances of the exclusions themselves. They may say things like:

• “We’re exempt because we’re a big company” — but fail to meet the specific criteria.
• “We’re publicly traded” — when in fact the parent company is, but the buyer entity is a less than 100% subsidiary.

It’s your job to verify, not assume.

4️⃣ Time Pressure at Closing

Closings are already time-sensitive, and verifying exemption status adds another layer of complexity. Gathering tax returns, organizational documents, or SEC filings is not always feasible on short notice — but failing to do so could mean you miss a required filing.

5️⃣ Ambiguity in Complex Structures

Many buyers use layered entity and trust structures. Even if the immediate transferee appears to qualify for an exclusion, you still need to consider whether that entity is acting on behalf of another, non-exempt party.

Best Practices for Identifying Excluded Transferees

So what can you do to navigate this challenge? Here are some best practices:

✅ Ask Early

As soon as you learn the buyer is a legal entity or trust, ask about their exemption status. Build this question into your intake forms or preliminary discussions, and flag it for follow-up.

✅ Request Documentation

Don’t rely on oral assurances. Request documentary proof of the claimed exclusion, or a reliance certificate from the buyer’s attorney that specifically supports the claimed exemption. 

✅ Evaluate Against the Rule’s Criteria

Have a checklist or matrix of the rule’s specific exclusion criteria, and compare the documentation you receive against it. 

✅ When in Doubt, File

If you cannot obtain adequate documentation, or if the buyer’s exemption status is ambiguous, the safer course is to file the FinCEN report. FinCEN has made clear that filing when not strictly required is not a violation — but failing to file when required can expose you to penalties.

✅ Use a Compliance Partner

Service providers like RRE Report can help clients quickly evaluate whether an exclusion applies — and if so, what documentation is needed to substantiate it. They can take the guesswork out of this process and help you make an informed, defensible decision.

Key Takeaways

✔ The Residential Real Estate Reporting Rule excludes certain well-regulated entities and trusts — but determining whether an exclusion applies is your responsibility as the reporting person.
✔ Exclusion claims must be backed by adequate documentation.
✔ Time pressure, ambiguous structures, and unclear buyer representations make this a complex task.
✔ Following best practices and partnering with service providers like RRE Report can help you get it right every time.