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Alerts and Updates

June 30 Deadline Fast Approaching for Foreign Investment Reporting, Including Ownership in Certain Foreign Real Estate

June 23, 2015

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U.S. persons owning an interest in a foreign business enterprise may have an obligation to file a BE-10 report by June 30, 2015.

The International Investment and Trade in Services Survey Act requires the mandatory filing of reports for those with ownership in a foreign affiliate. The U.S. Bureau of Economic Analysis (BEA) conducts this benchmark survey every five years. Unlike prior reporting periods, where filing was mandatory only if contacted by the BEA, the 2014 filing must be submitted by any U.S. person who maintained direct or indirect ownership or control of at least 10 percent of the voting stock of an incorporated foreign business enterprise or an equivalent interest in an unincorporated foreign business enterprise at any time during the 2014 fiscal year.

The current year filing deadline for the fully completed and certified series of BE-10 forms has been extended from May 29, 2015, to June 30, 2015, for new filers. Reasonable requests for an extension of time to file will be considered. Extension requests must be received by the BEA no later than June 30, 2015, and itemize substantive reasons for the extension request. The BEA will provide a written response to each request.

Hereafter, a U.S. person may have an obligation to report to the BEA quarterly, annually or every five years, depending on the value of the foreign affiliates reported on the BE-10 report. Presumably, the BEA will advise the U.S. person of the reports required and deadlines once the U.S. person files the BE-10 report.

The Purpose of This Form

The Benchmark Survey of U.S. Direct Investment Abroad is conducted to secure current economic data on the operations of U.S. parent companies and their foreign affiliates. The BEA compiles this information to develop monetary policies on an international basis. The BE-10 report is not a tax filing.

Who Must File?

Any U.S. person that maintained ownership in a foreign affiliate is required to file. Filing applies to any U.S. person that had a direct or indirect ownership or control of at least 10 percent of the voting stock of an incorporated foreign business enterprise (defined as any entity located outside of the United States), or an equivalent interest in an unincorporated foreign business enterprise at any time during the U.S. person's 2014 fiscal year. U.S. residents, individuals, estates, trusts, nonprofit organizations, limited liability companies, partnerships and corporations generally all qualify as U.S. persons for these purposes. The U.S. person is known as the "U.S. Reporter." The definition of a business enterprise refers to any organization, association, branch or venture that exists for profit-making purposes, or to otherwise secure economic advantage, and any ownership in rental real estate held for profit-making purposes and not for personal use.

What Information Must Be Reported?

Every U.S. Reporter is required to file Form BE-10A. The type of entity will dictate which sections of Form BE-10A must be completed. In addition, Forms BE-10B, BE-10C or BE-10D may be required to provide information on the U. S. Reporter's foreign affiliates. The threshold amounts of the foreign affiliates' total assets, sales or gross operating revenues determine which of these additional forms have to be filed.

Penalties for Failure to File

Failure to file may result in civil penalties ranging from $2,500 to $25,000. Those who willfully do not file, including any officer, director, employee or agent of a corporation, may also be subject to criminal penalties of not more than $10,000, and if an individual, may be imprisoned for not more than one year, or both.

Taxpayers with an interest in or control of a foreign business enterprise should consider consulting with legal counsel qualified to ensure compliance with necessary filings related to their ownership in a foreign affiliate and to potentially avoid the stiff penalty assessments that may result from a failure to report.

The filing requirements, forms and procedures are not unduly complex and can be found on the BEA website. Included within the website are FAQs and other helpful information.

For Further Information

If you would like more information about this topic or your own unique situation, please contact any of the practitioners in the Tax Accounting Group. For information about other tax and accounting topics, please visit our publications page, located here.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.