Update for U.S. Companies with Foreign Subsidiaries and Other Affiliates – Extended Deadline Approaches for Mandatory Reporting on Form BE-10

June 14, 2015 Craig Tzvi Gherman

The June 30, 2015 extended deadline for first-time filers of the U.S. Department of Commerce, Bureau of Economic Analysis’ (“BEA”) Benchmark Survey of U.S. Direct Investment Abroad (the “BE-10”) has almost arrived. While past participation in the BE-10 was either voluntary or due to being contacted directly by the BEA, this year’s BE-10 is mandatory for all subject persons, referred to as “U.S. Reporters”, as discussed below.

What’s the purpose of the BE-10 filing?

The BEA uses the BE-10 to collect economic data regarding U.S. direct investment abroad. The BE-10 is conducted once every five years. The information collected in the BE-10 is only used for analytical and statistical purposes and is kept confidential.

Who must file the BE-10?

Any U.S. person[1] that had direct or indirect ownership or control of at least 10% of the voting stock of a foreign business enterprise (regardless of the value of such interest) at any time during the U.S. person’s 2014 fiscal year must file the BE-10 (a “U.S. Reporter”). This may include private and public companies, hedge funds, private equity funds, investment managers, and general partners. When considering whether a person meets the 10% threshold to be deemed a U.S. Reporter, and when compiling the BE-10 report, one must include the person’s “fully consolidated U.S. domestic enterprise” – (1) the U.S. business enterprise whose voting securities are not owned more than 50% by another U.S. business enterprise, and (ii) proceeding down each ownership chain from that U.S. business enterprise, any U.S. business enterprise whose voting securities are more than 50% owned by the U.S. business enterprise above it, excluding foreign branches and all other affiliates.

How is the 10% ownership requirement determined?

Direct ownership of 10% of a foreign business enterprise is easy to ascertain. However, calculating indirect ownership requires the U.S. Reporter to “look through” all intervening foreign enterprises to determine whether it indirectly holds 10% or more voting interests in a foreign business enterprise.

What form should be used for the BE-10 filing?

A U.S. Reporter must file a Form BE-10A, which covers its fully consolidated U.S. domestic business enterprise. In addition to its BE-10A, the U.S. Reporter must also file, for each of its foreign affiliates, a Form BE-10B, BE-10C or BE-10D, depending on (1) whether the foreign affiliate is majority or minority owned by the U.S. Reporter and (2) the amount of fiscal 2014 total assets, sales or gross operating revenues, excluding sales taxes or net income after provision for foreign income taxes of such foreign affiliate.

  • Form BE-10A – a U.S. Reporter that has, when consolidated with its majority-owned domestic subsidiaries, (i) total assets, (ii) sales or gross operating revenues excluding sales taxes or (iii) net income after U.S. income taxes greater than $300 million (positive or negative) at any time during the U.S. Reporter’s 2014 fiscal year, must file a complete Form BE-10A; all other U.S. Reporters need only fill out items # 1 – 42 and 97 – 114 of the Form BE-10A.
  • Form BE-10B – filed by any U.S. Reporter’s majority-owned foreign affiliates with assets, sales, or net income greater than $80 million (positive or negative).
  • Form BE-10C – filed by any U.S. Reporter’s: (i) majority-owned foreign affiliates with assets, sales, or net income greater than $25 million but less than $80 million (positive or negative);(ii) minority-owned foreign affiliates (with U.S. majority owner) with assets, sales, or net income greater than $25 million (positive or negative); and (iii) majority or minority-owned foreign affiliate with assets, sales, or net income of $25 million or less (positive or negative) but was the parent of another foreign affiliate filing on Form BE-10B or Form BE-10C.
  • Form BE-10D – filed by any U.S. Reporter’s majority or minority-owned foreign affiliate with assets, sales, or net income of $25 million or less (positive or negative), and was not the parent of a foreign affiliate being filed on Form BE-10B or BE-10C.

How is the filing made?

The U.S. Reporter can file the appropriate Form BE-10 in a number of ways – post mail, fax, or electronically via BEA’s electronic filing portal at www.bea.gov/efile. The BEA website (http://www.bea.gov/surveys/respondent_be10.htm) also provides a number of filing resources, including forms, filing instructions, FAQs and even video tutorials.

What are the penalties for failing to properly file the BE-10?

Failure to properly file the BE-10 (whether missing the deadline, using the wrong form or providing incomplete or inaccurate information) can result in civil and/or criminal penalties, ranging from $2,500 or more than $25,000 per violation, as well as injunctive relief compelling compliance on the civil side, and imprisonment of up to one year and/or a fine of not more than $10,000 per violation on the criminal side (if it is found that such failure was willful).

For assistance on this or any related issues, please contact Craig Tzvi Gherman at cgherman@swalegal.com or 646 328 0788.

[1] A “U.S. person” is defined as any person resident in the United States or subject to the jurisdiction of the United States. An individual is considered a resident of, and subject to the jurisdiction of, the country in which it is physically located, subject to certain qualifications set forth in the BE-10 instructions.

Craig is head of the Start-Ups practice and a partner in the Corporate, Securities and Private Equity practices at SWA. His diverse practice focuses on public and private company stock and asset based acquisitions and sales, mergers, capital raises, joint ventures and corporate governance, as well as commercial and other business transactions.

Craig Tzvi can be reached at 646 328 0788 or cgherman@swalegal.com

This SWA publication is intended for informational purposes and should not be regarded as legal advice. For more information about the issues included in this publication, please contact Craig Tzvi Gherman. The invitation to contact is not to be construed as a solicitation for legal work. Any new attorney/client relationship will be confirmed in writing.