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Report of Foreign Bank and Financial Accounts (FBAR) Filing Delayed Until June 30, 2011; Some Benefit/Pension Trusts May Need to File; Exceptions Clarified in Proposed Rule
The Treasury Department's Internal Revenue Service (IRS) and Financial Crimes Enforcement Network (FinCEN) have issued Notice 2010-23 and proposed rules, respectively, which relate to filing requirements for the Report of Foreign Bank and Financial Accounts (also known as FBAR).
The IRS Notice offers some administrative relief for persons having signature authority over, but no financial interest in, a foreign financial account and for persons with a financial interest in, or signature authority over, certain foreign commingled funds. The Notice modifies and supplements Notice 2009-62 which delayed filing requirements for FBAR until June 30, 2010.
Partly in response to comments as a result of the 2009 Notice, in Notice 2010-23 the IRS has decided to delay filing for persons having signature authority over, but no financial interest in, a foreign financial account until June 30, 2011. Also, the IRS has determined that it will not interpret the term “commingled fund” as applying to funds other than mutual funds with respect to FBARs for calendar year 2009 and prior years. Thus, the IRS has determined that it will not apply its enforcement authority adversely in the case of persons with a financial interest in, or signature authority over, any other foreign commingled fund with respect to that account for calendar year 2009 and earlier calendar years. A financial interest in, or signature authority over, a foreign hedge fund or private equity fund is included in the administrative relief provided in the preceding sentence.
The FinCEN proposed rules clarify which persons will be required to file reports of foreign financial accounts and which accounts will be reportable. In addition, the proposed rule would exempt certain persons with signature or other authority over foreign financial accounts from filing reports and would include provisions intended to prevent United States persons from avoiding this reporting requirement. The proposed rule indicates that while pension plans must file the FBAR, there are exceptions for governmental plans and for pension plan participants and IRA owners. Comments on the proposed rules are due by April 27, 2010.
Background:
The Department of Treasury requires "U.S. persons" who have a financial interest in or signature authority (or other authority) over any financial account in a foreign country to file form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (also known as FBAR), if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year. The IRS defines "U.S. person" as a citizen or resident of the United States, or a person in and doing business in the United States. The term "person" includes individuals and all forms of business entities, trusts, and estates. The original deadline to file the report was June 30, 2009. On June 24, 2009, the IRS announced that taxpayers who recently discovered their obligation to file FBAR could file the form delinquently, without penalty, by September 23, 2009, if they followed certain procedures.
There had been confusion and uncertainty in the industry as to whether or not U.S. pension and employee benefit trusts with foreign holdings as investments must file FBAR.
Government Resources:
Amendment to the Bank Secrecy Act Regulations -- Reports of Foreign Financial Accounts, proposed rule, Financial Crimes Enforcemet Network (FinCEN)
IRS Notice 2010-23, FBAR Filing Requirements -- Administrative Relief for Persons Having Signature Authority Over, But No Financial Interest In, a Foreign Financial Account, and for Persons with a Financial Interest In, or Signature Authority Over, Certain Commingled Funds
IRS Notice 2009-62, FBAR Filing Requirements - Extended Filing Date for U.S. Persons Having Signature Authority Over, But No Financial Interest In, a Foreign Financial Account, and for U.S. Persons with Financial Interest In, or Signatory Authority Over, Foreign Commingled Funds: Request for Public Comments on FBAR Filing Requirements
Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR)
IRS FAQs Regarding Report of Foreign Bank and Financial Accounts (FBAR)
IRS Announcement Allowing Delinquent Filing of FBAR Until September 23, 2009
IRS News Release: IRS Clarifies Requirement for Filing FBAR Form Due This Month (re: Announcement 2009-51)
Additional Resources:
FBAR Update - Deadline Extension and Proposed Regulations, Groom Law Group,
March 1, 2010
FinCEN and IRS Issue Guidance on FBAR Filing Requirements for Certain U.S. Persons,
Morgan Lewis & Bockius, February 26, 2010
FBAR: A Further Extension - Must Employee Benefit Plans or Their Managers File, Seyfarth Shaw, August 12, 2009
IRS Grants FBAR Filing Extension for Certain U.S. Persons, Morgan Lewis & Bockius, August 10, 2009
IRS Delays Offshore Investment Disclosure for Pension Funds, Pensions & Investments, August 7, 2009
Plans May Be Required to Report Offshore Investments by September 23, 2009, Groom Law Group
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