The Residential Real Estate Reporting Rule: A Major Shift in Real Estate Compliance

The Residential Real Estate Reporting Rule: A Major Shift in Real Estate Compliance

The Residential Real Estate Reporting Rule: A Major Shift in Real Estate Compliance – Join us for Complying with FinCEN's New Residential Real Estate Reporting Rule.

A major regulatory change is coming to the U.S. real estate market, and professionals in the legal, financial, and real estate sectors need to prepare now. Beginning December 1, 2025, the Residential Real Estate (RRE) Reporting Rule, issued by the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN), will take effect—introducing a nationwide obligation to report certain real estate transactions that previously may have evaded scrutiny.

The RRE Rule is part of FinCEN’s broader mission to combat illicit financial activity under the Bank Secrecy Act. Specifically, the rule targets non-financed transfers of residential real estate to entities and trusts—transactions that may otherwise bypass traditional anti-money laundering (AML) safeguards because they do not involve institutional financing. Historically, FinCEN has used Geographic Targeting Orders (GTOs) to collect information in certain high-risk markets, but the RRE Rule now replaces that patchwork with a comprehensive, nationwide system.

Who Needs to Report—and What Must Be Reported

Under the new rule, if a transaction is determined to be “reportable,” a Reporting Person must be identified. This person will be responsible for gathering extensive data about the transaction, including:

  • The identities of the Transferee Entity or Trust and its beneficial owners
  • The Transferor (seller)
  • The residential property being transferred, including legal description and address
  • The total consideration and breakdown of payments
  • The identity of persons signing documents on behalf of the transferee

If parties to the transaction fail to reach a Designation Agreement specifying who will act as the Reporting Person, the obligation defaults to a cascade of responsibility, potentially placing reporting duties on closing agents, preparers of settlement statements, or even title insurers.

Violations of the rule can result in civil penalties and criminal liability. Compounding the risk, Reporting Persons and those involved in Designation Agreements must retain documentation for five years after the closing. This includes certificates and memos substantiating how beneficial ownership was determined and how the reporting obligations were fulfilled.

New Obligations, New Questions

The RRE Rule presents both logistical and legal challenges. Who determines if a transaction is reportable? What qualifies as a “non-financed” transfer? How do real estate professionals verify exemption status? What happens when a trust is involved? These are just some of the complex issues that will arise under this rule.


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Want to learn more? Join us for our upcoming webcast, Complying with FinCEN’s New Residential Real Estate Reporting Rule, on July 23, 2025! To learn more about this program and to register for the webcast, click here.


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The Lawyer’s Mind: Flow

The Lawyer’s Mind: Flow

The Lawyer's Mind: Flow - Robert A. Creo

Arriba, Arriba, Arriba!

Roberto Clemente

Growing up in Pittsburgh in the 1960s, I idolized Roberto Clemente. One of my prized possessions is the polaroid my sister took of him standing at Forbes Field with the University of Pittsburgh Cathedral of Learning in the background. When he spoke to us that day at the railing before the game, I was awestruck. I nodded or moved my head in some manner. He smiled. I marveled at not only his hitting, base running, ability to throw a runner out from right field, but also at his seemingly effortless catches and running at various speeds — and of the tiny white sphere falling from the sky. Years later, while playing in the Allegheny County Bar Association softball league on a team that could go a whole season without winning a game, I had an insight catching a deep fly ball. Once I heard the smack of the ball against the bat and saw it heading my way, my whole being, my life itself, was concentrated on catching that ball. As I moved automatically and effortlessly into position, nothing else in the universe existed in my mind, soul or body, as all of my energy, my very being, knew that ball was going into my glove.

Athletes commonly refer to this state of optimal confidence and performance as being in “the zone.” This phenomenon is now well-known after being studied and written about in academic journals and the popular press. This dynamic, coined “flow” in 1970 by psychologist Mihály Csíkszentmihályi of the University of Chicago, has been recognized in other forms and labels in recorded history across the globe. Flow has been extensively researched with well-documented correlations with high performance in the fields of artistic and scientific creativity, teaching, learning and sports.


Don’t miss your chance to register for Estate Planning in Depth 2025: The Do’s, The Don’ts, and the Must Knows, via live webcast on July 15, 2025. To learn more about this program and to register for the live webcast, click here.


Central to contemplative Eastern philosophies and many religious and spiritual practices is focusing the mind and body on the moment, physical attribute, visualization or harmonizing intent, awareness and effortless actions for peak performance and outcomes. In 1690, the English philosopher John Locke published “An Essay Concerning Human Understanding,” writing about the different states of thinking ranging from deep reflection (earnest study) to an absence of thoughts, noting that everyone has experienced these differences in attention. William James, credited with founding the discipline of psychology, referred to the “stream of consciousness” as a stream of thoughts and emotions transversing our awareness as our mind responds to stimuli or simply wanders through our memories.

My challenge, often in the nature of a quest, is how to master our craft, our chosen business, to achieve flow — to visit the zone — as frequently as possible. This personal gauntlet entered my own consciousness when I started my first job as a lawyer as in-house counsel for a manufacturing company to form a legal department consisting of myself and general counsel. My first day on the job he explained that we were highly educated technicians of law who should undertake any task, no matter how big or small, with full dedication to excellence. When lawyering, I hoped to snag that dropping ball with confidence. Over the years, I integrated, first on a subconscious level and recently, purposefully, contentment as a platform for competency and effectiveness.

Minds have limited capacity and endurance. Just being alive, our biology, the five senses and automatic muscle functions demand a significant portion of our brain and energy. In microseconds, our body can spring into fight, flight or freeze modalities. We all have a fast brain that is on autopilot with defaults and shortcuts dictating our initial thoughts and reactions to our environment and stimuli. When we are awake, this data flow is constant and, in the current digital age, often fast and furious. Athletes, artists, trades, craftspeople, widget makers, drivers and others doing primarily physical actions, attain proficiency from repetition which encodes the neural network into what laypeople call muscle memory.  These workers are differentiated from knowledge workers where communication, based on primary skills of reading, writing or arithmetic, is how clients and customers are serviced. Knowledge workers deliver thought products.


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Effective legal representation only comes from actions based on critical thinking after interactive engagement and communication with the client based upon the specific issues and rules at play in the realm of the legal system. Lawyers engage in advocacy, transactions, counseling, planning, regulating, negotiating and an array of other activities integral to our chosen profession. As knowledge workers operating in a system of uncertainty and risk in the age of information overload, can lawyers achieve flow and be in the zone? Yes.

The Nature of Flow

When in the flow state, people are immersed in the task at hand such that they lose awareness of all the outside environment, including time, distractions and even basic bodily needs, as all attention is only on the task being performed. There is a total engagement from energized concentration and full involvement as the works come to mind and leap to the page or from the lips. This complete surrender to the moment may result in a distortion of the sense of time. Flow blurs action and consciousness in an effortless way. In a litigation or negotiation, the words flow without pause and are spoken without premeditation. When drafting documents, the thesaurus of the years of lawyering finds the best word or phrase as it magically appears on the screen.


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Administrative Law in Transition: Regulation and Executive Action After Loper Bright

Administrative Law in Transition: Regulation and Executive Action After Loper Bright

Administrative Law in Transition: Regulation and Executive Action After Loper Bright - June 23, 2025 - 12noon to 1:15 pm Eastern

The Supreme Court ended its 2023-2024 term with a series of blockbuster decisions that reshaped how courts evaluate agency action. As regulatory power evolves, lawyers advising clients in regulated industries — and those engaging with or challenging federal agency action — need to understand concrete impacts of these cases to inform how they adapt to this new and still-evolving landscape.

Our upcoming course, Administrative Law in Transition: Regulation and Executive Action After Loper Bright, is taking place via live webcast on June 23, 2025.

One year on, what effects have we seen from these decisions? How are courts and agencies responding?

Featuring three administrative law experts with a breadth of experience in appellate advocacy and government service at the DOJ and White House, this webcast will help you plan a path ahead with an exploration of:

  • The effects and impacts that have already materialized for courts, agencies, and regulated industries, and expected impacts
  • Other major issues on the horizon that may magnify or intersect with the 2024 decisions
  • How executive orders work today, and how litigation over them differs from suits contesting conventional agency action
  • Recent regulatory rollback efforts, how rollbacks compare to past practice, and ways they might play out in litigation
  • What clients can do to prepare for uncertainty and evolving changes

Don’t miss our other upcoming webcasts, including Wage and Hour Compliance: New Rules, Key Cases, and Practical Guidance, on August 19, 2025. This webcast will cover significant federal and state legislative and regulatory changes including overtime exemptions and off the clock work; updated guidance on independent contractor classification; and key court decisions shaping wage and hour litigation today.

Check out ALI CLE’s on-demand courses, including What Loper Bright Means for Employment and Labor Law; Regulatory Reboot: Loper Bright and the Future of Tax-Exempts; and more!

Explore all of our course offerings and register today to learn from front-line practitioners and get a deepened understanding of today’s regulatory landscape.


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Current Developments in Employment Law 2025

Current Developments in Employment Law 2025

Upcoming Premium Program - Current Developments in Employment Law 2025 - Santa Fe and Live Video Webcast - July 24-26, 2025

Current Developments in Employment Law 2025 – now in its 31st year – is taking place in Santa Fe, NM, on July 24-26, 2025, in person or via live webcast.

2025 will be an evolving and challenging year for employment practitioners, and Current Developments in Employment Law 2025’s program will be as up-to-date as its predecessors. Featuring active discussions between top practitioners, federal judges, and an EEOC representative, as they provide a thorough coverage of today’s most pertinent employment law issues, and comprehensive materials.

With an eye towards changes wrought by the new Administration, as well as the most recent court decisions, this conference will provide strategic insights to help you and your clients navigate through today’s challenges.

Topics will include the impact and opportunities of:

  • New leadership and directions of the EEOC and Department of Labor
  • Shifting wage and hour environment
  • Current and future role of the NLRB
  • Executive orders and future rulemaking
  • Latest on whistleblower law and employer retaliation
  • Changing face of DEI and equal employment
  • Supreme Court decisions in the 2024-25 term
  • Growing role of AI in employment practice and litigation

And so much more!

Current Developments in Employment Law 2025 will offer a 360-degree view of the most important employment and labor law developments from the diverse perspectives of a national faculty of federal judges, and of practitioners representing employers and employees.

Make valuable connections with faculty and like-minded colleagues and enjoy the unique offerings of Santa Fe, including the renowned Spanish Market immediately following the conference.

This national conference will deliver insight and nuance that cannot be found at other employment law programs. Register today!


Join us for our upcoming program, Current Developments in Employment Law 2025, in Santa Fe, New Mexico, in-person or via live webcast, on July 24-26, 2025! To learn more about this program and to register for the live webcast, click here.


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EMPLOYEE STOCK OWNERSHIP PLANS FOR CONSTRUCTION COMPANIES

EMPLOYEE STOCK OWNERSHIP PLANS FOR CONSTRUCTION COMPANIES

Employee Stock Ownership Plans for Construction Companies | Emily Stuart Horn & B. Davide Joffe

In recent years, a growing number of construction companies have established employee stock ownership plans (ESOPs).1 The interest in an ESOP is often generated by the need for an exit strategy for one or more of the owners of a closely held business, a common scenario in the construction industry. Because private equity buyers are rarely interested in construction companies and because construction companies seem less likely to sell to competitors than companies in other industries, the construction industry seems particularly drawn to ESOPs. In circumstances where the business is not easily sold to a third party and/or the owners have a desire to provide for continuity, an ESOP can be a great solution.

ESOPs provide a tax-advantaged path for an exit strategy, and they can provide liquidity for owners that may not be easy to obtain in a sale to a third party. ESOPs help build an ownership culture and incentivize employees to grow the company. As a related matter, they can be a useful retention tool. The increased cash flow generated by reducing or eliminating taxes can be critical to the sustainability of the company.

There are unique issues that construction companies need to address in implementing an ESOP, particularly with regard to sureties and any new debt that is incurred by the company to complete the ESOP transaction. The following provides a background on ESOPs and an analysis of issues affecting construction companies.


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BACKGROUND

An ESOP is a type of tax-qualified retirement plan that primarily invests in employer stock. Like other retirement plans, the ESOP is governed by the terms of a formal plan and trust documents. The ESOP buys shares from selling shareholders, the company, or some combination of both. In a leveraged transaction, the shareholders typically sell their stock to the ESOP. The ESOP will usually purchase the stock through a combination of seller notes and cash borrowed from the company, which in turn will often borrow money from a bank.

Employees are usually allowed to participate in an ESOP after completing a year of service and will have shares allocated to their account for each year of service they continue to provide. Through additional allocations of stock and increases in share value, employees can accumulate significant tax-favored retirement savings over time. Employees are able to access their retirement savings in an ESOP after they retire (or, with some limitations, terminate their employment) and can generally roll over these funds to another retirement plan or IRA. The company has the flexibility to tailor the ESOP and its distribution policy to the needs of the company and employees through different eligibility, vesting, and distribution options.

There are several tax advantages to an ESOP. One such advantage is that contributions by the company to the ESOP to enable the ESOP to repay the promissory note are tax deductible (up to certain limits); thus, a loan used to finance an ESOP transaction can be repaid with pre-tax dollars. Additionally, a selling shareholder of a C-corporation may be able to elect Internal Revenue Code Section 1042 tax-deferral treatment of the capital gains associated with the sale of his or her shares, subject to certain requirements. Finally, for companies that elect S-corporation status, the ESOP’s share of recognized earnings is ordinarily exempt from income taxes. The goal for most ESOP-owned companies is to eventually become a 100 percent ESOP-owned S-corporation, thereby achieving the best possible tax status.

To start the ESOP process, companies will usually obtain a feasibility study that considers valuation, transaction size, financing, surety program impact, and the expected benefits delivered to employees over time. The ESOP process will also ordinarily consider the long-term goals and related incentives for management, including any management transition issues.


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ISSUES UNIQUE TO CONSTRUCTION COMPANIES

Maintaining Continuity

Many construction companies are closely held companies that do not have a business continuity plan. They may be owned by the founder or a small number of shareholders who are not working for the company. An ESOP can provide continuity by establishing a market for the purchase of shares.

Incentivizing Employees

An ESOP is designed to provide employees with “skin in the game,” thereby incentivizing them to increase the value of the company stock and their beneficial ownership. As the number and value of shares allocated to an employee’s ESOP account grows, employees will see the dollar value of their account grow as well. It is not uncommon for long-term employees to be able to accumulate significant wealth in an ESOP. Given labor shortages in the construction industry, an ESOP can provide an important retention tool and incentive for employees to remain employed with the company and pursue long-term growth. Also, because union employees can be excluded from participating in an ESOP, an ESOP may also reduce employee interest in unionization.


CLICK HERE to read the full article, which was originally published in ALI CLE’s The Practical Real Estate Lawyer.


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