FinCen has issued final regulations concerning the Report of Foreign Bank and Financial Accounts (Form TD-F 90-22.1) (“FBAR”) (31 CFR §1010.350). The FBAR regulations are effective March 28, 2011 and apply to FBARs required to be filed by June 30, 2011 with respect to foreign financial accounts maintained in calendar year 2010, and for FBARs required to be filed for subsequent years. An FBAR for a calendar year is required to be filed by June 30 of the following calendar year.
The FBAR regulations attempt to clarify the rules which were previously largely contained in the instructions to the FBAR.
Under the FBAR regulations, “[e]ach United States person having a financial interest in, or signature or other authority over a bank, securities, or other financial account in a foreign country…” the value of which exceeds $10,000 must file an FBAR with the U.S. Department of the Treasury. For this purpose a bank account is an account maintained with a person in the business of banking. A securities account is any account with a person in the business of buying, selling, holding or trading stock or other securities. The term “other financial account” means (i) an account with a person in the business of accepting deposits as a financial agency; (ii) an account which is an insurance or annuity policy with a cash value; (iii) 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 (iv) an account with a mutual fund or similar pooled fund that issues shares available to the public and has a regular net asset value determination and regular redemptions. The FBAR regulations reserve the question of whether private equity funds or similar funds are reportable accounts. There are exceptions to the reporting requirement for certain accounts of, or which involve, a government, or which are maintained by banks and used solely for bank to bank settlements.
A U.S. person has “a financial interest in each bank, securities or other financial account in a foreign country” for which the U.S. person is the owner of record or has legal title — whether the account is maintained for the U.S. person’s benefit or for the benefit of others. Where an account is maintained in the name of more than one person, each U.S. person in whose name the account is maintained has a financial interest in that account.
Also, a U.S. person has “a financial interest in each bank, securities or other financial account in a foreign country” for which the owner of record or holder of title is:
- a person acting as an agent or in some other capacity on behalf of the U.S. person;
- a corporation in which the U.S. person owns directly or indirectly more than 50 percent of the voting power or the total value of the shares;
- a partnership in which the U.S. person owns directly or indirectly more than 50 percent of the interest in profits or capital;
- a trust if the U.S. person is the trust grantor and is treated as an owner of a portion of the trust for U.S. federal tax income purposes;
- a trust in which the U.S. person either has a present beneficial interest in more than 50 percent of the assets or from which the U.S. person receives more than 50 percent of the current income. However, the U.S. person is not required to file an FBAR to report the trust’s foreign financial accounts if the trust, trustee of the trust or agent of the trust is a U.S. person who files an FBAR to report the trust’s foreign financial accounts; or
- any other entity in which the U.S. person owns directly or indirectly more than 50 percent of the voting power, total value of the equity interest or assets or interest in profits.
The words “signature or other authority” means the authority of an individual (alone or with another) to control the disposition of money, funds or other assets held in a financial account by direct communication (in writing or otherwise) to the person with whom the financial account is maintained. Officers or employees of certain entities regulated by the U.S. government or whose equity securities are listed on a U.S. national securities exchange or registered under the U.S. Securities Exchange Act need not file an FBAR reporting that the officer or employee has signature or other authority over a foreign financial account if the officer or employee has no financial interest in the account.
A U.S. person having a financial interest in, or signature or other authority over 25 or more foreign financial accounts need only provide in the FBAR the number of accounts and certain basic information, but will be required to provide detailed information for each account when requested.
Participants and beneficiaries in qualified retirement plans or individual retirement accounts are not required to file an FBAR for a foreign financial account held by, or on behalf of, the retirement plan or IRA.
A U.S. person entity which owns directly or indirectly more than a 50 percent interest in one or more entities required to file an FBAR may file a consolidated FBAR.