According to the Wall Street Journal columinst Jonatahn Lachowitz there are ‘New’ Expat-Related U.S. Filing Looms For Small Business and Real Estate Owners.
You may have lived in the U.S. last year – or were a U.S. government employee anywhere in the world — and had a small business or rental property outside the country. If so, get ready for yet another potential filing requirement from Washington, D.C., and give a hearty welcome to Form BE‐10 from the U.S. Department of Commerce. Financial planner Jonathan Lachowitz explains:
What is the BE-10?
The BE-10 is a Benchmark Survey from the Bureau of Economic Analysis (BEA) under the U.S. Department of Commerce. The BE-10 is conducted every five years and is meant to cover all U.S. direct investment abroad from both large and small companies; it’s related to the annual BE-11 Survey of Large Companies.
According to the rules, the BE-10 treats people as “companies” and is required for even the smallest economic activity abroad by an individual — for instance, the BEA expects you to report if your small apartment in Mexico generates $5,000 in income each year.
The BE-10 reporting requirement recently came as a surprise to me and many of my associates who work with international clients and small businesses in various legal, tax and financial capacities. Yes, it was conjured into existence via congressional passage of the International Investment and Trade in Services Act of 1976. But there’s a new development we recently stumbled upon.
Most BEA surveys are only required to be filed by companies contacted by the BEA. Until recently, that included the BE-10, in my view. The BEA contends that for the 2009 BE-10 Survey, companies and individuals had to file the form whether or not they received a request. However on Nov. 20, 2014, the Bureau of Economic Analysis published a rule in the Federal Register indicating that the change occurred at that point: Under “Description of Changes”, the rule states: “Under the revised regulations, unlike many other BEA surveys conducted pursuant to the Act, persons subject to the reporting requirements of the BE-10, Survey of U.S. Direct Investment Abroad, are required to respond whether or not they are contacted by BEA.”
How was I supposed to know about this new development with the BE-10?
You would have known if you read the Federal Register, which is considered a legal notice to U.S. business enterprises (people, too) of their obligation to report. I don’t know about you, but the Federal Register isn’t high on my reading list.
According to a BEA Spokesperson, the bureau:
- Produced a BE-10 resource page on the BEA website that includes comprehensive instructions, forms, FAQs, and videos on the BE-10 reporting requirements and a link to the BEA electronic filing system.
- Held webinars for new filers about the reporting requirements and the survey program and posted a recorded webinar on the BEA website.
- Says a large number of legal and financial advisers of private industries have reached out to BEA and are spreading the news about the 2014 BE-10 Survey to their clients and the general public through web-based newsletters about the survey.
- Conducted extensive research, compiled a comprehensive list of filers, and mailed notices to them about possible reporting requirements.
I suspect they focused their outreach their efforts on large and mid-size enterprises, which would make a lot of sense in terms of capturing the bulk of the data they’re looking for. But I believe a much greater and more timely effort could have been made to reach out to small business owners and individuals. During the last few days of May, the BEA extended the deadline for a month for new filers.
What are the penalties for not filing a BE-10 if I’m supposed to?
No filing requirement from Washington would be complete without a penalty for failure to file; this can range from $2,500 to $25,000 as a civil penalty. However, if you willfully fail to file (meaning essentially you know that you have an obligation to file the BE-10 and you don’t), you may be fined another $10,000 and sentenced to up to one year in jail or both.
What resources exist to explain more about the BE-10?
- Introductory video on BES Web site.
- Information for new filers of the BE-10: Most of you won’t be able to file the forms electronically the first time.
- Who must file the BE-10: This link fails to mention foreign real estate…You’ll will have to read further.
- Be-10 instructions.
- BE-10 useful links to all forms.
What will I likely have to file if I’m a really small foreign business owner or own foreign real estate?
If you’re like most small business owners and owners of foreign real estate that generates any income, my reading of the instructions is that you’ll most likely need to:
- Fill out form BE‐10 A Sections 1,2 and 5 only.
- Write an “explanatory note” affirming why your status is that you only need to fill out these three sections (Hint: assets, sales or net income less than $25 million and various other thresholds)
- Fill out Form BE‐10 D
When is the Form BE‐10 due for new filers?
Until recently, the deadline was May 29, 2015, so you would already be late. However, due to popular demand, the deadline for new filers has been extended to June 30. Thank goodness. I just found out about this on May 27.
What If I want some more help or want to pay someone to take care of this filing for me?
You could try calling the BEA; their contact details are here. If your experience is the same as mine, you’ll be asked to leave a message. My guess is these staffers will have their busiest month ever, so good luck getting through. You could also try looking for the various law firms and accounting firms that work on a cross-border basis and have helped to spread the word in the last several days about the BE‐10 filing requirements.
Jonathan Lachowitz, the founder of White Lighthouse Investment Management of Lexington, Mass., and Lausanne, Switzerland, is a financial planner and fee-only investment adviser specializing in cross-border planning.
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