While five years may signify the grace of God, goodness, and favor towards humans for those of you who are religious, the U.S. government and its myriad of complex reporting rules is neither graceful nor good, and it certainly shows no favors towards humans. You and your clients are just getting comfortable with the TCJA and GILTI taxes for foreign companies and now here comes another form and filing requirement, the BE-10. This is not some new IRS reporting regulation or tax. The BE-10 and related forms come from the Bureau of Economic Analysis, and the benchmark survey that happens every five years.
If an individual owns at least 10% of a foreign company or any foreign rental real estate, May 31, 2020, is the next reporting deadline for the BE-10. There are a few significant changes to this year’s reports. There is no minimum asset or income size (so yes, that one weekend Airbnb rental of your pied-à-terre in Paris for St. Valentine’s day in 2019 technically gives you a reporting requirement), and the potential fines are between $2,500 to $25,000 for not filing. Below is the important information that you need to know to comply with the BE-10 reporting requirements; but not the more complex and comprehensive versions of the other BE-10 forms for large companies.
What is the BE-10?
The Form BE-10 is used for the benchmark survey conducted by the Bureau of Economic Analysis every five years to gather economic data about U.S. companies and individuals’ investments outside of the U.S. For large companies, the reporting is rather comprehensive. For smaller companies and individuals, most will only have to file the BE-10A and BE-10D. The BE-10B or BE-10C may be required if assets, sales, or gross operating revenues are over $25 million (positive or negative).
Who has a filing requirement for the BE-10?
Individuals, trusts, estates, and nonprofit organizations who own at least 10% of a foreign company or who own any foreign rental real estate, will have a BE-10A filing requirement. The BE-10A is a much simpler form than the full BE-10 for large companies, and as long as the company had less than $300 million (positive or negative) of any of the following items during 2019, then they can submit the BE-10A (and BE-10B, BE-10C, or BE-10D) instead of the full BE-10:
- Net income after U.S. taxes
- Total assets
- Sales or operating revenues (not including sales taxes)
So your client comes back to you and says, really, I just own a small apartment in London that I occasionally rent out, it is not in a company, and I don’t make much money. Do I really have a filing requirement? Whether the property is in a company or not does not determine whether there is a filing requirement. If the property is used to generate income, then yes, regardless of if it is held in a company or not, there is a filing requirement. The BEA is clear about the reporting requirement for foreign real estate.
In case you have investments in a U.S. territory or associated state, then you will want to know the following. U.S. Territories such as Puerto Rico and Guam are not considered “foreign” for BE-10 reporting. However, if you happen to have investments in the Associated States of the Marshall Islands, Palau, or Micronesia, then you will have a BE-10 filing requirement as these are considered foreign to the U.S.
What is new for the 2020 Filing of the BE-10A?
One of the most significant changes for the 2020 form is the collection of the 20-digit Legal Entity Identifier (LEI) number. The addition of the LEI will allow the BEA to more easily tie the survey statistics to other reports, but you can also guess that it will be much easier to measure non-compliance if an entity has an LEI that is active, has indicia of U.S. ownership, and no BE-10A is filed. In addition to adding the LEI there were several simple check boxes added or removed from the form. If you are interested in reading about all of the changes, these were entered into the Federal Register on Nov. 12, 2019 (84 FR 60912) and can be found in this four-page document.
What is the key information I will need to complete the form BE-10A?
The BE-10A is not a long form. In addition to several straightforward check boxes, you should have the following information for the fiscal year of 2019 and will probably need to include form BE-10D, which is for smaller entities (BE-10B and BE-10C are for larger entities) and contains the following information:
1. Total assets and liabilities
2. Total sales or gross operating revenues
3. Net income or loss after foreign income tax is paid
4. The ownership percentage, both direct and indirect, of the person reporting
Additionally, you will want to have the name of the entity, the country, and the city in which it is located, the number of employees, and the primary industry code, which can be found at this link.
Where can I file the form, and when is the filing due?
For the latest survey the BEA now has a new e-file option. Filing by fax and mail remain as options, and the BEA provides the possibility for the acknowledgment of receipt of the filing.
The filing deadline for the BE-10 is May 31, 2020. The BEA is not ready yet to accept submissions, but according to their FAQ on this subject, they are committed to be ready between mid-February and March.
Where can I get more information?
The BEA web site has a Frequently Asked Questions page that will answer many of the common questions about filing and of the BE-10 forms. For e-filing help you can call the BEA help desk at 301-278-9401.
The BE-10A is not a difficult form to complete or file. The main challenges are to be informed or find out that you have an actual filing requirement (this is not very well advertised or communicated to the potential population of people required to report) and then to make the effort to find someone who will complete the form if you don’t want to do it yourself. With the links in this article, you should have enough resources to be able to determine reporting requirements for yourself or your clients, file the form BE-10A, and sleep easy knowing that you won’t be fined up to $25,000 for failure to file.
By the time the next filing rolls around for the BE-10A in May of 2025, we will be preparing for all the provisions of the TCJA that sunset.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Jonathan Lachowitz is a CFP® professional in the U.S. and Switzerland and founder of White Lighthouse Investment Management. He is specialized in cross-border financial planning and investment management and works with many multi-national families. He is the Chairman of American Citizen’s Abroad Inc., has written for financial news publications on personal finance, and has been an occasional lecturer at IMD and ESCP Business Schools.