The IRS on Friday suspended any requirement for persons other than U.S. citizens and domestic entities to file a Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), otherwise due on June 30, 2010. The Service also extended until June 30, 2011, the deadline for filing an FBAR that would otherwise be due for 2010 and earlier calendar years for persons who only have signature authority over, but no financial interest in, a foreign financial account and those holding foreign commingled funds. Also on Friday, the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued proposed regulations intended to clarify these and other issues.
Suspended Filing Requirement
In Announcement 2010-16, the IRS temporarily suspended the FBAR filing requirement for persons who are not U.S. citizens or residents or domestic corporations, partnerships, trusts or estates. Such persons had not been required to file an FBAR under instructions for a July 2000 version of the form. However, instructions with an October 2008 revision of the form added to the definition of a U.S. person required to file those “in and doing business in the United States.” In response to “numerous questions and comments” about the revised definition, the IRS in Announcement 2009-51 said persons could rely on the earlier definition for FBARs due on June 30, 2009. On Friday, the IRS extended that relief to FBARs due June 30, 2010, and substituted the earlier definition of U.S. person with respect to FBARs for calendar 2009 and earlier calendar years.
In Notice 2010-23 the IRS provided administrative relief from FBAR filing responsibility for persons with only signature authority over, but no financial interest in, a foreign financial account and those with signature authority over or a financial interest in foreign commingled funds. The 2008 revised form instructed persons holding only signature authority to file even if the owner of the account reported it separately on an FBAR. They also defined foreign accounts as including those “in which the assets are held in a commingled fund and the account owner holds an equity interest in the fund (including mutual funds).”
For both signing authority only and commingled funds, the IRS in Notice 2009-62 provided an extended filing date of June 30, 2010, for FBARs due in 2009 and earlier calendar years. The latest notice extends the FBAR filing deadline in those situations until June 30, 2011, for 2010 and earlier years.
FinCEN’s proposed regulations (RIN 1506-AB08, amending 31 CFR Part 103) would define a U.S. person required to file an FBAR as a U.S. citizen or resident or domestic entity, using the definition of “U.S. resident” found at IRC § 7701(b), except that the definition of “United States” is that of 31 CFR § 103.11(nn): the states, District of Columbia, Indian lands (as defined in the Indian Gaming Regulatory Act), and U.S. territories and insular possessions. This differs from the usual definition of “U.S. resident” for section 7701 purposes, which is that found in Treas. Reg. § 301.7701(b)-1(c)(2)(ii): the states, District of Columbia and U.S. territorial waters.
The FinCEN proposed regulations would define “financial interest” and “signature authority.” A person having a “financial interest” in a foreign financial account under the proposed regulations includes (1) a United States person who is the owner of record of or who holds legal title to the foreign financial account and (2) a United States person on whose behalf the owner of record or holder of legal title to the foreign financial account is acting with respect to the account. It also includes a person who has a more-than-50% stock interest in a corporation, a profits or capital interest in a partnership, or a beneficial interest in the assets or current income of a trust that is an owner of record of or holds legal title to a foreign financial account. “Signature authority” would mean authority of an individual (alone or in conjunction with another) to control the disposition of funds or assets held in an account.
The proposed regulations would continue the reporting requirement for United States persons with signature or other authority over foreign financial accounts. However, they would exempt from reporting certain officers and employees of financial institutions that have a federal functional regulator, and certain entities that are publicly traded on a U.S. national securities exchange, or that are otherwise required to register their equity securities with the SEC, where these officers or employees have signature or other authority over a reportable account but have no financial interest in the account.
Comments on the proposed regulations are requested by April 27 by e-mail to email@example.com.