By June 30, 2011, every U.S. person who owns or controls a foreign financial account must report those accounts to the IRS on form TD 90.22-1, (the FBAR form) if the value of the accounts totaled more than $10,000 at any time during calendar year 2010. Through new regulations issued earlier this year, significant changes have been made to the rules that define who has to file, with the most significant changes impacting individuals who have signature authority over accounts owned by their employers.
The charts below summarize the principal obligations and exemptions from filing. The charts are meant to provide general information and should not be taken as advice on or analysis of any particular situation. The first chart addresses obligations of individuals, other than those in a trust setting, the second addresses the obligation of entities, other than those in a trust setting, and the third chart addresses beneficiaries of trusts.
Common to each of the charts is the definition of a foreign financial account. A foreign financial account is:
(1) Located outside the U.S. It is the geographical location that is important. If, however, the maintenance of an account by a global custodian allows a person to access an account located outside the United States, it is a foreign financial account even if the global custodian is located in the United States.
(A) Example: A bank account in the New York branch of a non-U.S. bank is not a foreign financial account because it is not located outside the United States.
(2)One of the following types of accounts:
(A) a bank account, which includes a savings, demand, checking, or any other account maintained by a person in the business of banking
(B) a securities account, which includes any account with a person engaged in the business of buying, selling, holding, or trading stock or other securities
(C) an account with a person in the business of accepting deposits as a financial agency
(D) an insurance or annuity policy with a cash value
(E) an account with a broker or dealer for futures or options transactions in any commodity on, or subject to the rules of, a commodity exchange or association
(F) a mutual fund or similar pooled fund that issues shares available to the general public that have a regular net asset value determination and regular redemptions.
A foreign financial account does not include:
(1) ownership of an individual bond, note, or stock. If, however, those assets are held by a broker or other person in a securities account located outside the United States, it is a foreign financial account. In some jurisdictions a securities account or other bank account may have ownership of stock in a corporation that is a passive foreign investment company (PFIC) for U.S. tax purposes. For FBAR purposes the account that holds the PFIC stock is treated as a foreign financial account.
(2) investments in hedge funds, venture capital funds, and private equity funds because interests in those types of funds are not generally available to the public
(3) interests in a retirement plan that holds the account, or interests in an IRA that holds the account.
Additionally, reporting is generally not required for the following accounts:
(1) an account owned by a government entity
(2) an account owned by an international financial institution of which the United States is a member
(3) an account in a U.S. military banking facility (or U.S. military finance facility) operated by a U.S. financial institution designated by the U.S. government to serve U.S. government installations abroad
(4) a correspondent or nostro account that is maintained by a bank and used solely for bank-to-bank settlements.