Reporting Foreign Accounts in the Age of Transparency - Part 2
"United States Person"
The instructions to the previous edition of the FBAR defined the term "United States person" to mean:
(1) a citizen or resident of the United States
(2) a domestic partnership
(3) a domestic corporation, or
(4) a domestic estate or trust
The revised FBAR, however, defines the term "United States Person" to mean "a citizen or resident of the United States, or a person in and doing business in the United States."
The instructions to the revised FBAR also add a new reference to 31 Code of Federal Regulations (CFR) 103.11(z) for the definition of a "United States person."
This regulation defines such "person" as:
"An individual, a corporation, a partnership, a trust or estate, a joint stock company, an association, a syndicate, joint venture, or other unincorporated organization or group, an Indian Tribe (as that term is defined in the Indian Gaming Regulatory Act), and all entities cognizable as legal personalities."
The instructions to the revised Form also add the statement that "a branch of a foreign entity doing business in the United States is required to file this report even if not separately incorporated under U.S. law."
Because 31 C.F.R. 103.11(z) is issued under the Bank Secrecy Act (as opposed to under the Internal Revenue Code) changes to the instructions in the revised FBAR leave it unclear whether the terms "U.S. resident" (for this purpose) and the acts necessary to be considered "doing business in the United States," are determined with reference to the law under the Internal Revenue Code, or only under the Bank Secrecy Act. Only through separate IRS communications and guidance have some of these issues been clarified.
So, what do we know?
Aside from U.S. Citizens and other income tax residents (corporations, trusts and estates) being required to file the Form, the IRS has expanded the scope of the FBAR to include foreign corporations with a U.S. presence that have U.S. employees with signing authority over foreign bank accounts.
The FBAR filing requirement applies not only to a corporation itself, but also to its employees who hold signature authority over corporate accounts even if those employees have no financial interest in the account.
Also, according to IRS officials, the new 2009 FBAR requirements apply to self-employed nonresident aliens doing business in the U.S. As such, independent contractors that remain nonresident aliens for income tax purposes but who are, nevertheless, working in the U.S. will be subject to the new 2009 FBAR filing requirement on the basis that the individual is "doing business" in the U.S. , while non-resident aliens who are employees would not be considered to be "doing business in the U.S.
A U.S. person is deemed to have an interest in an account irrespective of whether the foreign account is for his or her benefit. If a U.S. person has a power of authority for a different individual who has a foreign bank account, the attorney-in-fact as agent is also required to file an FBAR even if the principal also files an FBAR. Thus, the new form expands the definition of a financial interest.
A fiduciary who is a U.S person and who has control as a trustee for an IRA with a foreign account must also file an FBAR. The requirement also extends to a U.S. person who creates a trust or is deemed to own a trust and who thereby could be classified as having a financial interest if the trust owned foreign accounts.
If a U.S. corporation owns a further foreign corporation with multiple foreign accounts, the U.S. corporation itself must file an FBAR. However, so too must the owners of the US corporation who own directly or indirectly more than 50% of the total value of the shares of the stock in the company.
In summary, the population of those required to file the Form has widened significantly as result of the changes introduced. Who said it was easy!?...