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New Requirements for Tracking International Affiliates and Rental Real Estate: BE-10 Report

Posted 5:45 PM by

The rules related to BE-10 filing requirements have changed this year and will require additional people (“Reporters”) to complete this informational form. Every five years, the Bureau of Economic Analysis (BEA), part of the U.S. Department of Commerce, conducts a survey to analyze the extent of U.S. persons’ direct investment abroad. Specifically, this year’s filing change relates to U.S. persons that own foreign affiliates and/or foreign rental real estate being required to file, regardless of being notified.

This is not a tax filing – it is an informational report that is filed directly on the BEA website. This form can be easily missed, so it is important that Reporters understand if they have a filing requirement and how to complete the form.

Previously, the BEA only required Reporters to file this form if they were notified of the requirement (usually via physical mail). However, the regulations have changed this year and anyone that meets the criteria outlined below must file, regardless of whether they were notified. This can lead to confusion and missed filings.

Who Should File a BE-10 Report?

The BE-10 report is required of any U.S. person (individual, branch, partnership, associated group, association, estate, trust, corporation or other organization, and any government) that had a foreign affiliate at the end of the U.S. person’s 2019 fiscal year. This means that any U.S. person that had a direct or indirect ownership of at least 10% of the voting stock of an incorporated foreign business enterprise or an equivalent interest in an unincorporated foreign business enterprise (such as a foreign branch) will have a BE-10 filing requirement as a U.S. Reporter.

Additionally, it is important to note that a foreign affiliate includes ownership of any foreign real estate held for profit-making purposes. Residential real estate held exclusively by a U.S. person for personal use is not subject to the reporting requirements. A foreign primary residence that is leased to others while the owner is a U.S. resident, but which the owner intends to reoccupy, is considered real estate held for personal use.

It is also important to note that a U.S. business entity that is a U.S. Reporter but is foreign-owned will still have to report any foreign business enterprise that it owns or controls at least 10% or more.

Finally, if a U.S. person had no foreign affiliates in 2019 but was notified that they needed to file a BE-10 report, a “BE-10 Claim for Not Filing” report must be filed. If they were not notified and have no foreign affiliates, no action is required.

Why Is This Information Collected?

The BE-10 survey is used to produce statistics on the scale and effects of U.S.-owned business activities abroad. In prior years, only people who were directly contacted by the BEA had to file Form BE-10. That has changed this year – all U.S. persons that fall into the reporting categories must file.

It is very important to note that failure to file can result in both civil and criminal penalties. Civil penalties can range from fines of $2,500 to $25,000. Willful failure to file can result in a penalty of not more than $10,000 and/or up to one year in prison.

When Are the Deadlines?

The BE-10 report is due on the following dates:

  • May 29, 2020 – For a U.S. Reporter required to file fewer than 50 forms.
  • June 30, 2020 – For a U.S. Reporter required to file 50 or more forms.

How to File

Visit the BEA’s website, which includes a direct link to file online. Detailed instructions to help Reporters complete the form can be found here.

The above information is for informational purposes only in order to notify our clients and friends of the filing requirement and potential penalties if the deadlines are not met. Please reach out to your KSM advisor if you need assistance gathering the information requested to complete and submit the BE-10 report.

About the Author
Katherine Malarsky is a director in Katz, Sapper & Miller's Tax Services Group. Katherine’s focus includes analytical research and technical review of tax issues. Additionally, she assists companies and individuals in navigating the complexities of doing business abroad. Connect with her on LinkedIn.

 

About the Author
Laura Gualdoni is a manager in Katz, Sapper & Miller’s Tax Services Group. Laura advises the firm’s international clients on tax compliance, income tax provisions, and provides general business consulting. Connect with her on LinkedIn.

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