Form BE-10 in the land of the freeJune 26, 2015 - Phil HodgenFriday Edition
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Why the Form BE-10 Exists
Today’s topic is not about taxes, but a form that U.S. people need to be concerned about when doing business outside the United States. The new paperwork is Form BE-10, from the U.S. Bureau of Economic Analysis.
The Bureau of Economic Analysis recently adopted mandatory BE-10 reporting.
The form is authorized by the International Investment and Trade in Services Act, embodied in Title 22 of the United States Code, Sections 3101 to 3108.
- Section 3101 declares that the purpose of Congress is to collect information about U.S. investment abroad and foreign investment in the US. 22 USC §3101(a)(1).
- Section 3104 gives broad power to the Bureau of Economic Analysis to adopt regulations to carry out the purpose of the act. 22 USC §3104(a).
In other words, Congress gave the BEA authority to pass regulations, require you to comply with the regulations, and impose fines if you do not comply. In the words of the immortal Sex Pistols, your submission (caution: loud) to the BEA’s desires is a matter of Federal law.
The BEA adopted final regulations for BE-10 on November 20, 2014, under 79 FR 69043. The regulations are found at 15 CFR §801.8.
The regulations require every person who is subject to the reporting requirements to report to the BEA, regardless of whether the BEA contacts them or not. 15 CFR §801.8(a). Before the final regulations, a person was required to respond only if the BEA asked for the information.
Family of Forms
Form BE-10 is an umbrella term for a family of forms (Forms BE-10A through BE-10D), each of which satisfies a different filing requirement. The precise form used depends on whether the “U.S. Reporter” has a majority or minority stake in a “foreign affiliate”, and also depends on hitting certain financial thresholds for assets, sales, or net income.
Confusingly, there is also a form that is simply numbered BE-10, named “BE-10 Claim for Not Filing“, that you file if you are not required to file any of the other forms.
If you are filing fewer than 50 forms, the response is due on May 29, 2015. If you are filing 50 or more, the response is due on June 30, 2015.
This is for the 2014 fiscal year of the person who is required to file. 15 CFR §801.8(d).
Yeah. I know.
Every man, woman, child, corporation, partnership, trust, dog, goldfish, and parrot living in the United States must file. OK. That’s a slight exaggeration.
You must file a form if:
- You are a “U.S. person”” who has an investment in a “foreign affiliate”. 15 CFR §801.8(b)(1). (This means BE-10A through BE-10D).
- You are a “U.S. person” who does not have an investment in a “foreign affiliate”. 15 CFR §801.8(b)(2). (This means you file Form BE-10 to say you are not filing anything).
Read literally, every single individual living in the U.S. and every single entity — corporation, partnership, LLC, or otherwise, must respond. If it has a foreign affiliate, then it must file Form BE-10A, B, C, or D. If it does not have a foreign affiliate, then it must file Form BE-10 Claim for Not Filing.
As you can see, the regulations carefully define the universe of people who must file a piece of paper as 100% of people who are “U.S. persons”.
The term “U.S. person” means a person who is a resident of the U.S. or subject to U.S. jurisdiction. BE-10 instructions (warning: PDF), Section III.D (page 5 of the instructions) gives you exhaustive information about this defined term. Generally, for a human being, that means where you live, rather than your citizenship.
I want to emphasize that I am only reporting on a small subset of the people who must file this form. I would be here all day if we started talking about corporations, partnerships, trusts, estates, joint ventures, etc. Also, watch out for situations where foreign persons own U.S. corporations, partnerships, etc. and whether and how there might be filing requirements for Form BE-10 in those situations.
Check carefully to see if you are a U.S. resident as defined in these instructions.
There are penalties for failing to file, but it remains to be seen how the BEA will choose to enforce the penalties. I suspect that that the BEA will not enforce the Form BE-10 Claim for Not Filing requirements, unless the BEA directly contacts the U.S. person, but it will enforce the other BE-10 filing requirements.
Every U.S. person who owns more than 10% of a foreign business should respond. If a U.S. person does not own more than 10% of a foreign business, and wants to be safe, then the appropriate thing to do is file Form BE-10 Claim for Not Filing.
One Year at a Time
15 CFR §801.8 was written specifically with year 2014 in mind. The due dates are specifically named as May 29, 2015 and June 30, 2015. 15 CFR §801.8(d).
The BEA may loosen or tighten the requirements for next year. Keep an eye out for the federal register or the BEA website.
I have a friend — a Canadian lawyer. He semi-jokingly said to me one day, “Your national anthem says you are the ‘Land of the Free’. Tell me one facet of your life that is not regulated by your government.”
His question made me sad.
This Form BE-10 stuff makes me sad, too. We are a tiny bit less free this year than we were last year.