Every day, at least one US person with business overseas will learn of some horrible US government form they are in non-compliance with. Whether it is a 1040 they didn't report worldwide income on, an FBAR form for foreign bank accounts (or foreign life insurance or pensions), or for an IRS Form 5471 for a foreign corporation they own. Compliance for the US international investor just seems to be never-ending.
Hat tip to Jonathan Lachowitz who writes over on the Wall Street Journal Expat blog about this:
The BE-10 is a Benchmark Survey from the Bureau of Economic Analysis (BEA) under the U.S. Department of Commerce. The BE-10 is conducted every five years and is meant to cover all U.S. direct investment abroad from both large and small companies; it’s related to the annual BE-11 Survey of Large Companies.
According to the rules, the BE-10 treats people as “companies” and is required for even the smallest economic activity abroad by an individual — for instance, the BEA expects you to report if your small apartment in Mexico generates $5,000 in income each year.
The BE-10 reporting requirement recently came as a surprise to me and many of my associates who work with international clients and small businesses in various legal, tax and financial capacities. Yes, it was conjured into existence via congressional passage of the International Investment and Trade in Services Act of 1976.
The BE-10 surprised us too
The "new" non-tax related filing requirement is for any U.S. persons, companies, trusts, or estates that are engaged in any profit-making ventures outside the United States. The BEA conducts several surveys each year to collect statistical data on various aspects of the U.S. economy. One of those surveys, which is performed every 5 years, is designed to collect data on U.S. investments into profit-making ventures outside the United States and 2014 is the most recent year for which reporting is due. This survey is titled the "2014 Benchmark Survey of U.S. Direct Investment Abroad."
For most of the surveys conducted, the BEA will compile lists of potential survey respondents from income tax filing records and will send a survey request to each person or company on that list. But, for the 2014 survey, the BEA has stated that it will not be sending out targeted requests but instead expects every person who may have a reporting requirement under this survey requirement to file a survey without being independently contacted. And, the reporting is mandatory.
The BE-10 is not just about Expats
The survey is required for any U.S. person, company, trust, or estate (or any other legal organization or association of individuals) that is conducting any for-profit activities outside the United States while under U.S. jurisdiction — one doesn't have to be a US Expat, although the requirement will affect any expat abroad for less than a year. As an interesting note, ownership of real estate outside the United States is specifically defined as being a business enterprise unless the real estate is residential and held for personal use, and not profit-making purposes – any other real estate owned outside the United States is subject to being reported.
In general, this reporting requirement would apply to any U.S. person, company, trust or estate that:
- owns more than 10% of any foreign business (or holds more than 10% of the voting rights to the foreign business);
- performs self-employment or business activities (not in any organized business) outside the United States; or
- owns more than 10% of any real estate outside the United States (unless it is residential real estate for personal use only).
Every person, company, trust, or estate that has a filing requirement is required to file a Form BE-10A. In addition, they must then file separate reports for each of its foreign "affiliates" as outlined below.
There are different reporting forms required for each foreign "affiliate" based mainly on the amount of the "affiliate's" assets, gross revenue, and net income. And, as the amount of the assets, gross revenues, or net income (and complexity of the business structure) increases, the reporting requirements become more complicated.
BE-10 Filing Requirements for under $25 million
Most expats and US persons would fall into the lowest requirement category, Form BE-10D, which applies to any foreign "affiliate" for which its total assets, gross revenues, and net income are less than $25 Million AND the foreign "affiliate" is not a parent company of another foreign affiliate that would have reporting requirements in one of the higher-tiers. The Form BE-10D will require you to list (for each "affiliate"):
- Name of foreign affiliate
- Country of location
- City of location
- Primary Industry Code
- Number of employees
- U.S. report’s percentage of ownership (direct and indirect)
- Total assets of the affiliate
- Total liabilities of the affiliate
- Sales/gross operating revenues
- Net income or loss after foreign income tax
- Amounts owed to the U.S. reporter by the foreign affiliate
- Amounts owed to the foreign affiliate by the U.S. reporter
BE-10 filing requirements for $25 million – $80 million
If the foreign "affiliate" has total assets, gross revenues, or net income of more than $25 Million but less than $80 Million, then you would have to file Form BE-10C for that "affiliate," which will require more in-depth information than the Form BE-10D.
BE-10 Filing Requirements for over $80 million
If the foreign "affiliate" has total assets, gross revenues, or net income of more than $80 Million, then you would have to file Form BE-10B for that "affiliate," which will require more in-depth information than the Form BE-10C.
BE-10 Filing Requirements with more than 50 affiliates
For anyone reporting fewer than 50 "affiliates" the due date for this filing is June 30, 2015 and no extension appears to be available. Anyone reporting more than 50 "affiliates" who requires more time than June 30th to complete the report can request an extension until July 31st or August 31st, but must provide a good reason for needing more time.
You can find more information about the reporting requirements and access these forms at the BEA's landing page for this survey.
Impact on FBAR and OVDP
Because this form is not being requested by the Treasury Department or the IRS, it should have absolutely no impact on any Offshore Voluntary Disclosure or Streamlined disclosures that you have made or will be making. This requirement is totally separate and independent of any tax or FBAR reporting requirements.
Form BE-10 Extension
As of June 26th, 2015, the BEA has changed their extension policy. The old BE-10 extension form suggested a requirement of 50+ forms, but the current BE-10 extension form seems to suggest that as long as you file an extension request, it will be granted. Seems like someone was getting overloaded with extension requests — turns out when you create a mandatory compliance requirement, you may be biting off more than you can chew!
Form BE-10 Failure to File Penalties
Of course, there could be no mandate without some enforcement mechanism. The failure to file Form BE-10 is found in the instructions:
Penalties – Whoever fails to report shall be subject to a civil penalty of not less than $2,500, and not more than $25,000, and to injunctive relief commanding such person to comply, or both. Whoever willfully fails to report shall be fined not more than $10,000 and, if an individual, may be imprisoned for not more than one year, or both. Any officer, director, employee, or agent of any corporation who knowingly participates in such violations, upon conviction, may be punished by a like fine, imprisonment or both (22 U.S.C. 3105). These civil penalties are subject to inflationary adjustments. Those adjustments are found in 15 C.F.R. 6.4.
So, for not sending in a survey, yes it seems as if you can be imprisoned. If you need assistance either filing, or coming into compliance for non-filing, contact us. We can help.