Few people have heard of the US Bureau of Economic Analysis (BEA), an agency of the Commerce Department. The BEA provides the US government with statistical information regarding the US economy. To aid in this endeavor, every five years it does a benchmark survey of foreign investment by US persons.

This year’s survey is mandatory for US persons (individuals and companies) that have a 10% or greater voting interest (directly or indirectly by attribution) in a foreign entity, business, branch, or commercial real estate. (There is no de minimis investment exemption). Compliance with the requirements of the survey involves the completion of a questionnaire (on one or more Forms BE-10) by the US person regarding both the US operations, as well as each of the foreign operations. 

As discussed in more detail below, questionnaires under the survey are due, for some respondents, as early as May 29, 2020. However, an extension until August 31, 2020 is available. 

Respondents who fail to file a required report are potentially subject to a civil penalty of up to $48,192 per form for non-compliance. Injunctive relief is potentially available to the BEA. Criminal penalties are also a possibility in the case of a willful failure. BEA personnel have stated informally that it is rare for them to invoke penalties (civil or criminal). In addition, we are not aware of any instance in which a person was penalized for non-compliance (or for filing late) in the survey that took place five years ago. 

The filings with the BEA are confidential and cannot be shared with other government agencies. They can only be used by the BEA for analytical or statistical purposes. The information cannot be used in a manner that would allow a respondent to be identified without the respondent’s prior written permission. The information collected by the BEA cannot be used for the purposes of taxation, investigation, or regulation and are immune from legal processes. In addition, the filings are immune from Freedom of Information Act (FOIA) requests.
 
Filing Requirements

The requirements apply to US persons that owned a requisite interest in a foreign entity, business, branch, or commercial real estate at any time during 2019. Filings are based on the US person’s fiscal year that ended in 2019. 

The determination of whether an entity is a US or foreign person is generally based on the place of formation of the entity. In determining whether an individual is a US or foreign person, generally the person’s country of citizenship will control. However, the country of residence will control, if different, if the individual resides, or expects to reside, in a different country for one year or more (except if the residency is temporary). 

There is an exemption from filing with respect to certain investments in foreign private funds. Such investments are generally subject to reporting under the Treasury International Capital (TIC) survey of portfolio investments. The exemption is designed to eliminate duplicative filings.
 
There is apparently no exemption for inactive companies. However, companies that liquidated before the end of the fiscal year that ended in 2019 are not required to file. Similarly, no filing is required for foreign entities that liquidated before the end of their fiscal year that ended in 2019.

Completing the Forms

There are five different forms available under the 2020 survey. Filers will complete a Form BE-10A, as well as a Form BE-10B, -10C, or -10D for each foreign investment. 

The forms are generally due on May 29, 2020. However, filers that need to submit fifty or more Forms BE-10B, -10C, or -10D are not required to file until June 30, 2020. In either case, an extension is available until August 31, 2020.

Unlike other government agencies, the BEA has not issued a blanket extension in response to the COVID-19 outbreak (and does not plan to issue one). As a result, filers are best served by requesting an extension (even if the official due date has passed). 

In normal circumstances, the forms can be filed by mail, fax, or electronically. As a result of the COVID-19 outbreak, the BEA has requested that forms and extensions only be submitted electronically. 

Below is a list of the forms and a discussion of which ones apply to given foreign investments:

• Form BE-10A – Filed by US Reporter. US Reporter means the US person that has an investment in a foreign business enterprise. The US Reporter is allowed to file a partial Form BE-10A if it is an individual or has total assets, sales or gross receipts, and net income of less than $300 million (positive or negative) for the 2019 fiscal year. The US Reporter, whether filing a complete or partial BE-10A, must also complete a Form BE-10B, BE-10C, or BE-10D, as appropriate, for each foreign affiliate.
• Form BE-10B – Report filed for majority-owned foreign affiliates of US parents with assets, sales, or net income greater than $80 million (positive or negative). A BE-10B must be filed for each foreign affiliate of a US Reporter, whether held directly or indirectly.
• Form BE-10C – Report filed for majority-owned foreign affiliates of US parents (if Form BE-10B is not required) with assets, sales, or net income greater than $25 million (positive or negative); for minority-owned foreign affiliates of US parents with assets, sales, or net income greater than $25 million (positive or negative); and for foreign affiliates for which no one of the items: assets, sales, and net income was greater than $25 million (positive or negative) and is a foreign affiliate parent of another foreign affiliate being filed on Form BE-10B or BE-10C.
• Form BE-10D – Report filed for foreign affiliates if filing under Forms BE-10B or BE-10C is not required.
• If the US person had no foreign affiliates during its 2019 fiscal year, it must file a “BE-10 Claim for Not Filing”; no other forms in the survey are required.  (This is generally required to be filed if the BEA has requested that a US person file the form in writing, but the respondent has no foreign investments.)

Business enterprises that issue annual reports to shareholders should attach a copy of the report for fiscal year 2019 when filing Form BE-10.

Consolidated reporting is required by a group of US business enterprises. Two or more US business enterprises are considered to be part of a group if one enterprise owns, directly, more than 50 percent of one or more other enterprises (by vote). Chains of US business enterprises are included in the group to the extent a member of a group meets the more than 50 percent ownership requirement with respect to other US business enterprises. Minority-owned US business enterprises are excluded from consolidated filing group, as are foreign business enterprises that are owned by a US business enterprise (i.e., a foreign subsidiary). 

Generally, the forms request information typically found on an income statement and balance sheet, as well as information on the number of employees, research and development activities, exports and imports.

For more information, see the BEA website of Form BE-10.

A&M Taxand Says

The requirements to file Forms BE-10 will come as a surprise to many people. The requirements have never been heavily publicized. Completing the forms can be quite onerous. For example, Form BE-10A is fifteen pages long and contains 110 questions. The BEA estimates that it will take the average respondent 38 hours to complete the form. However, our experience is that it takes longer than that to complete the forms.