Surprise! The U.S. Department of Commerce (DOC) has issued a new reporting requirement (BE-10) for individuals, trusts, estates and small businesses with certain foreign assets, and it’s due June 30.
What’s BE-10? It’s a mandatory survey issued by the DOC every five years, inquiring about offshore business assets. In past years, only pre-selected, large companies have been required to respond to the survey. In 2015, the DOC announced that the scope of this year’s BE-10 has been expanded dramatically. BE-10 now applies to all U.S. persons who own qualifying foreign interests. There’s no minimum value for this reporting requirement.
Qualifying Foreign Interests
Qualifying foreign interests include land, whether or not it’s income-producing, and business interests. BE-10 must be filed by any U.S. person who had direct or indirect ownership or control of at least 10 percent of the voting stock of a foreign business enterprise at any time during 2014. The business enterprise could be incorporated or unincorporated. In fact, the definition of a business enterprise is quite broad, including any organization that exists for profit-making purposes. Notably, ownership of foreign real estate is expressly defined as a business enterprise, unless it’s residential real estate held exclusively by a U.S. person for personal use.
BE-10 now expressly applies to individuals, trusts and estates. A “U.S. person” is defined to include any U.S. citizen or resident individual and any trust, estate or business entity subject to U.S. jurisdiction.
The deadline for compliance by new filers is June 30. The maximum civil penalty for failure to file is $25,000, and if there’s a finding of willfulness, additional penalties of up to $10,000 and a one-year imprisonment may apply. However, the scope of the survey has been expanded so broadly and with such short notice that penalties applied to new filers may be subject to challenge.
The hurdles to filing BE-10 are significant and the burden of identifying and notifying affected clients seems to rest with professional advisors. This presents a big challenge. Advisors may not currently collect the data needed to identify all clients affected by this survey. Is your firm preparing Form BE-10 for individual or fiduciary filers this year?
For your convenience, below are links to the BE-10 and its instructions.