If you owned stock or other interest in a foreign corporation or business, or real estate located outside the United States at any time during 2014, keep reading to learn how to avoid fines up to $25,000 and possible criminal sanctions. The tax attorneys at Anderson & Jahde recently came across a little-known reporting requirement: those who fall within the above reporting requirements must complete and file Form BE-10 with the Bureau of Economic Analysis (BEA). The due date for the report was June 30th. But before you panic, we understand that extensions are available.
The requirement relates to the BEA’s Benchmark Survey of U.S. Direct Investment Abroad — 2014, which was instituted in November of last year. The BEA apparently conducts these surveys on a regular basis, but the obligation to complete the survey is generally dependent upon being contacted directly by the BEA. Under the regulations issued for the 2014 survey, however, participation in the survey is mandatory, and not dependent on contact from the BEA.
Who Must File Form BE-10?
The regulations state:
“. . . any U.S. person that had a foreign affiliate—that is, that had 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, including a branch—at any time during the U.S. person’s 2014 fiscal year…”
must participate in the survey by completing Form BE-10.
The regulations define a “United States Person” as “any person resident in the United States or subject to the jurisdiction of the United States.” The BE-10 instructions, however, clarify that “[a]n individual is considered a resident of, and subject to the jurisdiction of, the country in which it [he or she] is physically located.”
Exceptions
Based on this clarification, we at Anderson & Jahde believe that, subject to certain exceptions, U.S. citizens living abroad do not have to participate in the survey. The exceptions are:
- U.S. citizens who reside, or expect to reside, outside the United States for less than one year;
- U.S. citizens who reside, or expect to reside, outside the United States for one year or more if they were assigned to the foreign country by their employer (or business they own) to conduct business in the foreign jurisdiction, and they intend to return to the United States within a reasonable time; and
- U.S. Government employees, regardless of the expected length of their stay.
If you are a citizen of a foreign country living in the United States, the exceptions above would work in reverse – (i.e.- you plan on residing in the U.S. for less than a year, or you are in the United States for employment or business reasons, or as an employee of your government).
Once you determine if you are a “United States person,” you then must determine whether t you “had 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, including a branch—at any time during the U.S. person’s 2014 fiscal year,”
A “business enterprise” is defined as “any organization, association, branch, or venture which exists for profit-making purposes or to otherwise secure economic advantage, and any ownership of any real estate.”
For this, we believe a good rule of thumb is (1) if you were required to file IRS Forms 5471, 8865 or 8858 with your U.S. tax return; or (2) you own real estate in a foreign country, you are required to complete Form BE-10 and all applicable attachments.
Penalty
The statutes authorizing the surveys allow for (and require) the imposition of a penalty between $2,500 and $25,000 for not completing the survey, and also include criminal sanctions for willful failures to do so.
If you have questions about whether these laws apply to you, please call one of the attorneys at Anderson & Jahde at (303) 782-0003. We would be happy to help.