Help, I Think I Have a Form BE-10 Filing Obligation

| 3/5/2020
Help, I Think I Have a Form BE-10 Filing Obligation

International tax practitioners frequently field requests for assistance with what can best be described as tax-adjacent informational reporting matters. While international tax practitioners are not experts in the substantive law or regulations from which these nontax reporting obligations arise, information collected in the fulfillment of international tax reporting frequently overlaps much, if not all, of the information required by these obligations. Perhaps the most well known of these reporting requirements is Form FinCEN 114, commonly known as the Foreign Bank Account Report (FBAR), which reports information concerning the interests of U.S. persons in foreign financial accounts to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network. A similar but much less well-known reporting requirement is Form BE-10, “Benchmark Survey of U.S. Direct Investment Abroad,” issued by the Commerce Department’s Bureau of Economic Analysis (BEA).

What is Form BE-10?

Form BE-10 collects information necessary for the BEA to complete its survey, which is conducted every five years. The BEA defines direct investment abroad as “the ownership or control, directly or indirectly, by one U.S. person of 10 percent or more of the voting securities of an incorporated foreign business enterprise or an equivalent interest in an unincorporated foreign business enterprise” (including a branch or real estate held for other than personal use). The form is a series of questions directed at the financial and operating characteristics of, and on positions and transactions between, U.S. parent companies and their foreign affiliates in 2019. Form BE-10 is a series of forms including Form BE-10A, which covers the U.S. reporter, and Forms BE-10B, BE-10C, and BE-10D for each of the U.S. reporter’s foreign affiliates that meets certain thresholds. Most U.S. reporters will be allowed to file an abbreviated Form BE-10A, but if the U.S. reporter’s assets, sales, or gross operating revenues (excluding sales taxes) or net income for 2019 was greater than $300 million, a much more comprehensive form must be filed.

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Who must file?

Any U.S. person, which includes an individual, branch, partnership, associated group, association, estate, trust, corporation, or other organization, that is a resident in, or subject to, the jurisdiction of the United States and that has a direct investment abroad, as defined by the BEA, is considered a U.S. reporter and must file either an abbreviated BE-10A or a full Form BE-10 battery. Nonprofit organizations also are required to file Form B-10 as appropriate. Consolidated corporate groups may file on a consolidated basis, and Forms BE-10B, BE-10C, and BE-10D may be consolidated by country rather than individual entity in certain circumstances. Although U.S. reporters that do not meet certain thresholds have abbreviated filing requirements, there is no de minimis exception from filing.

When is Form BE-10 due?

Forms are due by May 29 for U.S. reporters required to file fewer than 50 Form BE-10Bs, BE-10Cs, or BE-10Ds and by June 30 for U.S. reporters required to file 50 or more forms. U.S. reporters may request a filing extension. The extensions frequently are granted, and the extension process is less formal than a typical tax extension.

What if I do not file?

Failure to file can result in penalties between $2,500 and $25,000. Penalties are not affected by the absence of a filing notice from the BEA. In prior years, the BEA often notified a U.S. reporter of the obligation to file. The BEA is not required to provide notice, and notice is increasingly rare.

What is the connection to my foreign informational tax reporting?

Much or all of the information may be available in materials collected in order to comply with foreign informational tax reporting attendant to IRS Form 5471, “Information Return of U.S. Persons With Respect to Certain Foreign Corporations”; Form 8858, “Information Return of U.S. Persons With Respect to Foreign Disregarded Entities (FDEs) and Foreign Branches (FBs)”; and Form 8865, “Return of U.S. Persons With Respect to Certain Foreign Partnerships.” International tax practitioners traditionally have assisted in the preparation of Form BE-10 and, consequently, might bring a familiarity to an exercise that arises only once every five years.

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Brent Felten
Brent Felten
Partner, Washington National Tax