The U.S. Department of Commerce has launched a benchmark survey through the Bureau of Economic Analysis (BEA) that requires all U.S. persons to report a 10% or greater ownership interest in a foreign business enterprise. The BEA defines a business enterprise 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.” The BEA Form BE-10 series reporting requirement applies to a U.S. person’s outbound investment in foreign countries. The BEA also has other benchmark survey reporting requirements, which apply to a foreign person’s inbound investment in the United States.
U.S. persons including C corporations, S corporations, partnerships, LLCs, individuals, estates, trusts, and nonprofit organizations are required to file the Form BE-10A by May 29, 2020. There is a one-month extension to June 30, 2020 for a U.S. person that is required to file 50 or more Forms BE-10 with the BEA. Otherwise, there is not any extension available to U.S. persons who are required to file less than 50 Forms BE-10 with the BEA.
The Form BE-10A reporting requirement applies to a U.S. person’s voting stock interest in an incorporated foreign company and to an ownership interest in an unincorporated foreign company. The definition of a reportable foreign business enterprise also includes a foreign branch. A foreign branch generally means the operations or activities conducted by the U.S. person in a foreign country in its own name, rather than through a foreign company. Real property located in a foreign country is also a reportable foreign business enterprise if it is held for profit-making purposes and not for personal use. A U.S. person must file the Form BE-10A if they own 10% of a foreign corporation or other foreign company. A U.S. person must report foreign branch activity and also ownership of real property in a foreign country if held to produce a profit. In some instances, indirect ownership interests in foreign business enterprises may be reportable.
According to the BEA reporting instructions, U.S. persons that do not own a 10% interest in a foreign business enterprise are technically required to file a claim for not filing the Form BE-10A. Certain penalties may apply if a U.S. person fails to comply with the survey requirement. The applicable penalties may include a fine and imprisonment of an individual for up to one year.
The BEA reporting requirement is a filing requirement that is in addition to certain U.S. international tax reporting requirements. A U.S. person may be required to file a disclosure with their U.S. federal income tax return to disclose ownership of a foreign company or foreign branch activity. The disclosure with a U.S. person’s U.S. federal tax return does not satisfy the BEA’s survey reporting requirement. The BEA reporting requirement is not a U.S. tax filing with the IRS. The BEA Form BE-10A is filed with the U.S. Department of Commerce through the BEA.
Additionally, a foreign business enterprise, referred to as the foreign affiliate in which the U.S. person is invested, may also be required to file a report with the BEA in response to the survey. A foreign affiliate is subject to certain filing thresholds based on its level of sales revenue, assets, or net income after foreign income tax provision. A foreign affiliate includes an incorporated or unincorporated foreign company and also a foreign branch.
Aronson LLC will assist clients with the preparation and filing of the BEA Form BE-10 series U.S. foreign direct investment reporting requirement. For more information, please contact Alison Dougherty at 301.222.8262.