Thursday, May 28, 2015

Updated: Gotcha! Yet another obscure asset reporting form for US persons

UPDATE: as of sometime this afternoon (depending on your time zone), the BEA has updated its website to extend the filing deadline to June 30 for all new filers. Moreover, it appears that the BEA definition of US Persons is generally limited to persons resident in the United States (with specific exceptions, see comment from Andrew below). As I mention in the comments, I am a bit wary about drawing conclusions of law from instructions to forms but I do think that the instructions at least form the basis for reliance that most physically non-resident US citizens should not be required to fill out the BE-10.  The sudden deadline extension nevertheless suggests that a number of people have been caught by surprise by the new reporting obligation, so that my main point about educating one's regulatory target is still apposite. I have revised this post accordingly.

It seems that in the United States, the asset reporting forms and non-filing penalties just keep on coming, and yet the will to inform individuals about their obligations--especially those who live outside of the United States and do not receive client alerts from big US law firms or big 4 accounting firms--remains curiously absent.  The Bureau of Economic Analysis does a survey of "US Direct Investment Abroad" every five years. In past years, if you were required to file, the BEA contacted you.

Not any more; now you are just supposed to know that the BEA exists and has its own reporting requirements, and that if you are a US person (which includes individuals), you are supposed to go and file a report to them, separate and distinct from all of of your other tax and financial asset reporting requirements. I do not know what the definition of US Person is for BEA purposes, and whether it includes US citizens and other persons, regardless of their residence--looking into that now. The definition of US Person for BEA purposes appears to diverge from that for tax purposes, such that in most cases reporting is required by those physically resident in the United States.

BEA reporting is subject to a civil penalty of $2,500 to $25,000 for nonfiling, plus $10,000, or a year in jail, or both, if the nonfiling was wilful. I am not sure who is responsible for collecting this fine but if it is the IRS (as is the case for FBAR), then I wonder why the Service doesn't bother to tell taxpayers about the form and its deadline anywhere at all on the IRS website.

A BE-10 form must be filed by any US Person that directly or indirectly held 10% or more of the voting securities ("US Reporter") of any non-U.S. business enterprise (a “Foreign Affiliate”). There are no de minimis exceptions: no matter how small your nonUS corporation might be (or have been-you must file for the year even if the corporation ceases to exist), you must report or face the penalty. US Reporters must file Form BE-10A for themselves and may have to file additional BE-10 forms for their corporations.

The deadline is tomorrow: May 29 now June 30. There is an extension available but it requires filing a request prior to the due date. Prepare for a delay in accessing that form right now--the BEA server appears to be overloaded. Possibly a request to extend filed today (if that is even possible from outside the United States) would be granted, I am not sure.

The BEA is a valuable source of information necessary for policy research, and I do not in any way object to the general need to collect information on US companies. What I object to is that again and again, US regulators seems to forget that "US Persons" includes a massive population of individuals who live permanently outside of the territory, who cannot realistically be expected to simply "know" about all the forms they are supposed to report, and who are dramatically underserved by the US agencies that continue to produce these requirements. US Persons are now potentially subject to three overlapping and duplicative reporting regimes, each with its own quirky forms, convoluted instructions, inconsistent deadlines, and heavy penalties: the IRS, the Financial Crimes Enforcement Network, and now, every five years, the BEA, all with little to no effort to educate the population each agency expects to be fully compliant.

I do wish that US lawmakers would understand that when they enact complex regulatory regimes with hefty penalties, they have a responsibility to educate the targets of that regulation. I am not talking about large, multinational conglomerates or high net worth individuals with teams of legal counsel. They are protected: their counsel's job is to keep up to date on all regulatory compliance regimes, inform their clientele, and and make money off compliance fees. I am not worried about them. I am talking about the human beings who just happen to live and work in other countries. If they have small businesses, they may well have non-US corporations in those countries where they live and work.  Regulatory agencies that seek to regulate these individuals have a responsibility to inform that is global in scope. It seems to me obviously unjust to suddenly impose complex requirements, with attendant penalties, on a whole new population without making any effort to educate them that this is the new order of things. Today's last-minute deadline extension seems to acknowledge this basic issue.


  1. I think that you are incorrect in thinking that the requirement to file the BE-10 applies to US citizens living outside the US.

    The BE-10 instructions are available here: (Sorry, I am unable to insert a link)

    Going through it systematically:

    I. Reporting requirments

    "A. Who must report – A BE-10 report is required of any U.S. person that had a foreign affiliate..."

    II. Definitions:

    "S. U.S. person means any person resident in the United States or subject to the jurisdiction of the United States. See III.D. "

    What does it mean here to be "subject to the jurisdiction of the United States"?

    III.D. Clarification of coverage

    "D. Determining country of residence or jurisdiction of individuals – An individual is considered a resident of, and subject to the jurisdiction of, the country in which it is physically located, subject to the following qualifications:

    "1. Individuals who reside, or expect to reside, outside their country of citizenship for less than one year are considered to be residents of their country of citizenship,

    "2. Individuals who reside, or expect to reside, outside their country of citizenship for one year or more are considered to be residents of the country in which they are residing.

    "There are two exceptions to this rule:

    "a. Individuals (and their immediate families) who either own or are employed by a business in their country of citizenship and who are residing outside of that country for one year or more in order to conduct business for the enterprise are considered residents of their country of citizenship if they intend to return within a reasonable period of time.

    "b. Individuals who reside outside their country of citizenship because they are government employees (such as diplomats, consular officials, members of the armed forces, and their immediate families) are considered residents of their country of citizenship regardless of their length of stay. "

    Note that in III.D. "AND subject to the jurisdiction" has replaced "OR subject to the jurisdiction"

    I find it hard to come to any other conclusion but that US citizens living outside the US are not subject to this filing requirement.

  2. thank you Andrew, this is helpful. I am always bit wary about relying on instructions to a form in drawing conclusions of law. However this at least provides a sufficient basis for reliance that any failure to file must certainly not be subject to any penalty.

  3. Allow me just two brief comments in conclusion. First, you are absolutely right that lawmakers and regulators who impose obligations have a responsibility to actively seek out and inform those affected. Second, and quite a different matter, I want to say how much so many of us appreciate the work you have done in support of ADCS.

  4. Informative post. I just filed several of these submissions last week. The filing requirement certainly caught most of my clients off guard.