May 27, 2020 / North America
Few people have heard of the US Bureau of Economic Analysis (BEA), an agency of the Commerce Department. The BEA provides the US government with statistical information regarding the US economy. To aid in this endeavor, every five years it does a benchmark survey of foreign investment by US persons.
This year’s survey is mandatory for US persons (individuals and companies) that have a 10% or greater voting interest (directly or indirectly by attribution) in a foreign entity, business, branch, or commercial real estate. (There is no de minimis investment exemption). Compliance with the requirements of the survey involves the completion of a questionnaire (on one or more Forms BE-10) by the US person regarding both the US operations, as well as each of the foreign operations.
As discussed in more detail below, questionnaires under the survey are due, for some respondents, as early as May 29, 2020. However, an extension until August 31, 2020 is available.
Respondents who fail to file a required report are potentially subject to a civil penalty of up to $48,192 per form for non-compliance. Injunctive relief is potentially available to the BEA. Criminal penalties are also a possibility in the case of a willful failure. BEA personnel have stated informally that it is rare for them to invoke penalties (civil or criminal). In addition, we are not aware of any instance in which a person was penalized for non-compliance (or for filing late) in the survey that took place five years ago.
The filings with the BEA are confidential and cannot be shared with other government agencies. They can only be used by the BEA for analytical or statistical purposes. The information cannot be used in a manner that would allow a respondent to be identified without the respondent’s prior written permission. The information collected by the BEA cannot be used for the purposes of taxation, investigation, or regulation and are immune from legal processes. In addition, the filings are immune from Freedom of Information Act (FOIA) requests.
The requirements apply to US persons that owned a requisite interest in a foreign entity, business, branch, or commercial real estate at any time during 2019. Filings are based on the US person’s fiscal year that ended in 2019.
The determination of whether an entity is a US or foreign person is generally based on the place of formation of the entity. In determining whether an individual is a US or foreign person, generally the person’s country of citizenship will control. However, the country of residence will control, if different, if the individual resides, or expects to reside, in a different country for one year or more (except if the residency is temporary).
There is an exemption from filing with respect to certain investments in foreign private funds. Such investments are generally subject to reporting under the Treasury International Capital (TIC) survey of portfolio investments. The exemption is designed to eliminate duplicative filings.
There is apparently no exemption for inactive companies. However, companies that liquidated before the end of the fiscal year that ended in 2019 are not required to file. Similarly, no filing is required for foreign entities that liquidated before the end of their fiscal year that ended in 2019…
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