![]() By: Douglas Finkle, Director, CohnReznick As U.S. manufacturers and distributors extend their operations globally, they need to be aware of required filings of certain governmental-type statistical survey reports. These impact U.S. individuals and businesses owning a foreign business operation as well as U.S. businesses owned by a foreign enterprise. The Bureau of Economic Analysis (BEA) requires that, every five years, all U.S. persons directly or indirectly owning 10% or more of the voting securities of an incorporated foreign business enterprise (or an equivalent interest in an unincorporated foreign business enterprise) deliver a survey report (essentially, a census report) to the BEA. The last required report was for fiscal year 2014 and now, five years later, reporting is required for fiscal year 2019. The survey form needed to report a U.S. person’s foreign investments is Form BE-10 Benchmark Survey of US Direct Investment Abroad. The BE-10 survey involves reporting by any U.S. person meeting the requirements for reporting, even if they are not directly contacted by the BEA. The BEA website states that respondents needing to complete the 2019 BE-10 will be notified by mail between mid-February and March of 2020. Failure to comply with, or timely deliver, the survey can result in non-compliance penalties similar to those imposed for non-compliance of U.S. Census-type reporting. The BE-10 reports financial and other information related to the U.S. person’s foreign investments. The report can be filed online, by fax, or by mail. Depending on the type and number of BE-10 forms a respondent is required to file, the due date is either May 29, 2020 (fewer than 50 forms), or June 30, 2020 (50 forms or more). BEA defines a U.S. person as any individual, branch, partnership, associated group, association, estate, trust, corporation, or other organization that is resident in or subject to the jurisdiction of the United States ( here defined as the 50 states, the District of Columbia, the Commonwealth of Puerto Rico, and all territories and possessions of the United States). Based on the BEA website, it appears that a “foreign business enterprise” is any business enterprise not meeting the definition of a U.S. person. For example, if a U.S. person owns and rents out a condo in the Virgin Islands, they would not be subject to the reporting requirements since the Virgin Islands is an unincorporated and organized territory of the United States. The investment the U.S. person has in the Virgin Islands condo would not be considered foreign real estate and not considered a foreign investment for purposes of the reporting requirements. Let’s change the example to focus on a U.S. person owning and renting a condo in France. In this case, that individual would likely be subject to the BEA reporting requirements since the investment in France would be considered foreign real estate and a foreign business enterprise. Foreign real estate owned by a U.S person subjects them to the reporting requirements unless the property is residential real estate held for personal use, is not intended to provide a profit, or is a primary residence abroad leased out by the U.S. person who intends to reoccupy. In each of these cases, the property is considered real estate held for personal use and not subject to the reporting requirements. So, why does the BEA conduct the survey and how is the information used? The survey is designed, for statistical purposes, to understand the scale and effects of U.S.-owned business activities abroad. Business leaders use the statistics to inform decisions on hiring and investing while policymakers and researchers use the survey data to analyze the impact of direct investment on jobs, wages, productivity and taxes. Reporting the results of BEA surveys is mandatory under the Omnibus Trade and Completeness Act of 1988 which also specifies that survey data may only be used for statistical and analytical purposes. Foreign investors in U.S. business enterprises are potentially subject to BEA requirements. Two surveys require reporting to the BEA even if the foreign investor is not directly contacted. The BE 12 Benchmark Survey of Foreign Direct Investment in the United States, conducted every five years, mirrors the BE-10 survey but is for a foreign investor in a U.S. business enterprise. The last survey was for the 2017 fiscal year, due 5/31/2018 or 6/30/2018 depending on the BE-12 forms required to be filed. There is also the BE-13 Survey for new direct investments in the United States. This covers new foreign investments in U.S. business enterprises or expansions that meet certain criteria. These new investments must be reported to the BEA within 45 days of the investment. Every U.S. persons with investments in foreign business enterprises, and every foreign investor in a U.S. business, needs to be aware of BEA reporting requirements and deadlines. Failure to comply with any of the surveys will subject the investor to potential non-compliance penalties.
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