In our Legal Alert dated Wednesday June 3, 2009, we highlighted the change in the 2008 instructions to the FBAR (IRS Form TD F 90.22-1, Report of Foreign Bank and Financial Accounts) as to the definition of the term “U.S. person.” As the Legal Alert explained, the 2008 FBAR instructions expanded that definition to include a non-U.S. person “in and doing business in the United States.”
Announcement 2009-51, issued on Friday, June 5, 2009, advises that the IRS is temporarily suspending the reporting requirement for this new class of FBAR filers that includes persons who are not citizens, residents, or domestic entities for FBARs due on June 30, 2009, which reports for calendar year 2008. Instead, the definition of a “U.S. person” from the prior 2000 FBAR instructions may be relied on. Thus, any non-U.S. person that otherwise would have met the new definition of a “U.S. person” is not required to file an FBAR for calendar year 2008.
Announcement 2009-51 further explained that, although the “U.S. person” definition under the October 2008 FBAR revision would not apply for the 2008 reporting year, all other requirements of the October 2008 FBAR and its instructions would remain in effect. This would include the expanded description of “other authority.” Moreover, the current version of the FBAR must be used when filing an FBAR, even an FBAR for a reporting year prior to 2008.
Apparently, the suspension of the “U.S. person” revised definition was due to numerous questions and comments from the public that requires additional guidance, which will be provided by the IRS in subsequent years. It is curious that the IRS stated that additional guidance would be provided in “subsequent years.” This reference could indicate that the new definition of “U.S. person” may not be operative for the 2009 reporting year.
The definition raised a number of troublesome questions for a non-U.S. person. For example, a nonresident who performs personal services in the United States is treated as engaged in a U.S. trade or business under Internal Revenue Code § 864(b). Thus, how much time may a nonresident spend in the United States on business trips before the nonresident is treated as “in and doing business in the United States”? Furthermore, if a foreign person is treated as “in and doing business,” but maintains a foreign financial account in which none of the cash or other assets are connected to that business, must that foreign person file an FBAR?