Each United States person who has a “financial interest” in, or signature or other authority over, a foreign financial account with an aggregate value over $10,000 at any time during a calendar year must file a Report of Foreign Bank and Financial Accounts (“FBAR”) on Form TD F 90-22.1 with the Department of the Treasury on or before June 30 of the following year. Final regulations (the “Final Regulations”) concerning FBAR filing requirements became effective March 28, 2011, and apply to FBARs required to be filed on or before June 30, 2011, with respect to foreign financial accounts maintained in calendar year 2010 and for FBARs required to be filed for subsequent years. The Final Regulations amend the Bank Secrecy Act implementing regulations regarding the FBAR filing requirements, which have been in place since 1972.
FBAR Filing Requirement
Under the Final Regulations, “Each 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 at any time during a calendar year must file an FBAR with the Department of the Treasury on or before June 30 of the succeeding calendar year.
What Foreign Financial Accounts Must Be Reported?
Under the Final Regulations, 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 Final Regulations reserve the question of whether interests in investment companies other than mutual funds and similar pooled funds (such as private equity or hedge funds) are reportable accounts. Note that a reportable mutual fund includes a hedge fund or a private equity fund if the fund is available to the general public and has net asset value determinations and periodic redemptions. Accordingly, if a pooled fund such as a hedge fund or a private equity fund is not available to the general public and does not have net asset value determinations and periodic redemptions, the fund does not have to be reported on FBARs required to be filed on or before June 30, 2011.
What is a Financial Interest?
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. Signature or Other Authority
“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 regulated entities or whose equity securities are listed on a U.S. national securities exchange or registered under the U.S. Securities Exchange Act (a “covered entity”) 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.
All U.S. persons required to file for calendar year 2010 — except for those limited individuals with extensions (described below) — must file the FBAR so that it is received by the Department of Treasury by June 30, 2011. Mailing on or before June 30, 2011, is insufficient for purposes of satisfying the deadline. Moreover, extensions granted by the IRS for federal income tax returns are independent of the FBAR filing deadline. Other than the limited extension described below, extensions of time to file the FBAR are not available.
Limited FBAR Extension
The Financial Crimes Enforcement Network (“FinCEN”) announced in Notice 2011-1 that it extended the deadline to June 30, 2012, for certain individuals to file an FBAR. The extension applies to: (i) an officer or employee of a covered entity who has signature authority over and no financial interest in a foreign financial account of a controlled person of the entity; and (ii) an officer or employee of a controlled person of a covered entity who has signature or other authority over and no financial interest in a foreign financial account of the entity, the controlled person or another controlled person of the entity. For these purposes, a “controlled person” is defined as a United States or foreign entity that is more than 50 percent owned, directly or indirectly, by the covered entity. FinCEN implemented the extension “to facilitate more accurate compliance.”