New Mandatory Filing Requirement for U.S. Persons with an Ownership Interest in a Foreign Business

taylorlaw | 06/01/2015

Most taxpayers are familiar with the need to file forms to report to the IRS foreign financial accounts and interests in foreign corporations and partnerships. There is one other filing requirement, Form BE-10, which is called the Benchmark Survey of U.S. Direct Investment Abroad. The survey is conducted every five years. The survey for 2014 was originally required to be filed by May 29, 2015.  Due to the lack of publicity, the due date has been extended to June 30, 2015.  It is to be filed with the Department of Commerce ‘s Bureau of Economic Activity.

Congress enacted legislation in 1976 authorizing the Commerce Department to collect information about U.S. ownership of foreign business entities every five years. The legislation is codified at 22 U.S.C. secs. 3101 et seq. Prior to the report for the 2014, year, filing was discretionary. The form for 2014 is mandatory and is required to be filed by June 30, 2015. By law, the information provided is to be confidential and is only to be used for statistical and analytical purposes.

Who Is Required to File:  Each “U.S. person” who owns 10% or more of the stock of an incorporated foreign business enterprise or an equivalent interest in a foreign unincorporated business enterprise at any time during the U.S. person’s 2014 fiscal year. A “U.S. person” is any person resident in the U.S. or subject to U.S. jurisdiction, including corporations, partnerships, individuals, estates and trusts. The person who files the Form BE-10 is referred to as a “U.S. Reporter.”  The incorporated or unincorporated foreign business enterprise is referred to as a “foreign affiliate.” 

Required Forms:  The report consists of several forms that are required to be filed: 

  • Form BE-10A, and BE-10B
  • BE-10C or
  • BE-10D

Form BE-10A is to provide information concerning the U.S. person that has the required interest in one or more foreign business enterprises. A complete Form BE-10A must be completed if the U.S. Reporter is a corporation and, as a fully consolidated business enterprise during its 2014 fiscal year, had  $300 million or more of a) total assets, b) sales or gross operating revenues (exclusive of sales tax), or c) net income after provision for U.S. income tax.  A U.S. Reporter that is a corporation that does not meet the $300 million threshold only has to complete items 1 through 42 and 97 through 114 of Form BE-10A.  Form BE-10A is available at http://bea.gov/surveys/pdf/be10/be10a_web.pdf

If the U.S. Reporter is an individual, estate, trust or non-profit entity and owns the foreign interest directly or through a foreign business entity, it only needs to complete items 1, 2 and 5 of Form BE-10A.

A U.S. Reporter must file Form BE-10B for each majority owned foreign affiliate that had assets, sales or net income greater than $80 million at any time during the 2014 fiscal year of the U.S. person.  Form BE-10B is available at http://bea.gov/surveys/pdf/be10/be10b_web.pdf.

The U.S. Reporter must file Form BE-10C for each majority owned foreign affiliate that had assets, sales or net income greater than $25 million but none of those items was greater than $80 million at any time during the fiscal year.  Form BE-10C is available at http://bea.gov/surveys/pdf/be10/BE10c_web.pdf.

The U.S. Reporter must file Form BE-10D for each foreign affiliate that does not have assets, sales or net income greater than $25 million at any time during the U.S. Reporter’s 2014 fiscal year.  Form BE-10D does not need to be filed if the foreign affiliate is the foreign parent of a foreign affiliate for which a Form BE-10B or BE-10C was filed.  A link to Form BE-10D is available at http://bea.gov/surveys/pdf/be10/be10d_web.pdf.

Filing Out the Forms:  Form BE-10A states that the estimated average time needed to review the instructions, research existing sources, gather and compile the data and complete the form is 144 hours.   The instructions for BE-10 are available online at http://bea.gov/surveys/pdf/be10/BE-10%20Instructions.pdf

Penalties:  A U.S. Reporter who does not file the required forms can be subjected to a civil penalty of $2,500 to $25,000.  The U.S. can also bring an action in U.S. district court to obtain an injunction against a person who fails to furnish the required information.  If the failure to file was willful, the U.S. Reporter can be subjected to criminal sanctions, including fines of up to $10,000 and imprisonment for not more than one year.

For more information, please contact us at 714-546-0445.