Regulations issued by the Financial Crimes Enforcement Network (FinCEN) under the Bank Secrecy Act generally require a U.S. person with a financial interest in, or signature authority over, a bank, securities or other financial account in a foreign country during any year to report the relationship to the IRS. Form TD F 90-22.1 (the FBAR) is used for this purpose. It is due by June 30 of the following year, although a person required to file the form must also check a box and list the country or countries where the accounts are held on the person’s individual or corporate tax return, which might be due earlier. Under the current regulations, there is no general exception from the FBAR requirement for pension plan trustees or administrators, whether they are individuals or entities.
In 2009 IRS officials were quoted as saying that the FBAR requirement applied to investments in foreign hedge, venture capital, and private equity funds—and not just traditional bank accounts or even the mutual funds mentioned in the FBAR instructions—and applied even to persons with signature authority over, but no financial interest in, a foreign account. This created considerable concern in the pension community, since many large pension plans have interests in foreign funds, and employees of the plan sponsor often have signature authority over them. In response, in August 2009 the IRS delayed the date for reporting interests in foreign commingled funds (including mutual funds), and for persons with signature authority over, but no financial interest in, a foreign account, for 2008 and prior years until June 30, 2010. See Notice 2009-62, 2009-35 I.R.B. 260.
On February 26, 2010, the IRS provided further relief in the form of Notice 2010-23. That notice (1) delays until June 30, 2011, the due date of the FBARs otherwise due on June 30, 2010, (including reports for 2008 and prior years whose due date was delayed by Notice 2009-62), for persons with signature authority over, but no financial interest in, any type of foreign financial account, (2) waives the FBAR requirement completely for interests in foreign commingled funds other than mutual funds for 2009 and prior years, and (3) instructs taxpayers who qualify for the relief in the Notice to check the “no” box in response to the FBAR-related questions on their individual or corporate tax returns.
Also, on February 25, 2010, FinCEN released proposed regulations and revised instructions to the FBAR that would, among other things, (a) suspend for the time being the FBAR requirement for interests in foreign hedge, venture capital, and private equity funds other than mutual funds, (b) clarify that retirement plan participants and beneficiaries do not have any FBAR reporting obligation despite their interests in the plan, and (c) exempt from FBAR requirement the accounts of employee retirement or welfare benefit plans of government entities. However, the proposed regulations also would clarify that the reporting requirement applies to commodity futures or options accounts, insurance policies with cash surrender values, and annuities. See 75 Fed. Reg. 8844 (Feb. 26, 2010).
Further information on the FBAR guidance can be found in a recent tax client alert, “Treasury and IRS Issue Limited Relief and Guidance on Foreign Bank Account Reporting.”1