Christopher Clifton

Generally, a U.S. person must file Form TD F 90-22.1 if that person has a financial interest in, signature authority or other authority over any financial account(s) in a foreign country and the aggregate value of these account(s) exceeds $10,000 at any time during the calendar year. The filing deadline for FBARs for each year is June 30 of the following year.

Announcement 2010-16 and Notice 2010-23 were issued to provide taxpayers with guidance on who is required to file FBARs due June 30, 2010. BKD can help taxpayers determine whether they have a filing obligation and assist with the preparation and timely completion of the necessary form.

Announcement 2010-16

In October 2008, the IRS published a revised FBAR form, together with accompanying instructions, changing the definition of “United States person” (U.S. person) to include any person (including foreign) “in and doing business in the United States.” The IRS subsequently issued Announcement 2009-51, which directed people to refer to the definition of U.S. person in the July 2000 version of the FBAR instructions to determine if they had a filing obligation. The term U.S. person from the July 2000 version of the FBAR means (1) a citizen or resident of the United States, (2) a domestic partnership, (3) a domestic corporation, or (4) a domestic estate or trust. Announcement 2009-51 effectively suspended filing FBARs due June 30, 2009, for persons who were not U.S. citizens, residents or domestic entities.

Announcement 2010-16 suspends the requirement to file an FBAR due June 30, 2010, for persons who are not U.S. citizens, residents or domestic entities. Those affected can rely on the FBAR’s July 2000 definition of a U.S. person to determine if they have a filing obligation for 2009 and earlier calendar years.

Notice 2010-23

Notice 2010-23 provides administrative relief regarding FBAR filings for certain persons who may be required to file an FBAR for calendar year 2009 and prior years.

On August 31, 2009, the IRS published Notice 2009-62, which extended the filing deadline for (1) persons with no financial interest in a foreign financial account but with signature or other authority over that account and (2) persons with a financial interest in, or signature authority over, a foreign financial account in which the assets are held in a commingled fund.

Since the issuance of Notice 2009-62, and receipt of a significant number of public comments, the Treasury Department has published proposed FBAR regulations to clarify instructions for the FBAR. To guide taxpayers on who is required to file FBARs due June 30, 2010, and in particular, to immediately guide taxpayers on answering FBAR-related, 2009 federal income tax return questions, e.g., Schedule B of Form 1040, the Other Information section of Form 1041, Schedule B of Form 1065 and Schedule N of Form 1120, the IRS and Treasury Department provide the following administrative relief:

1. Signature Authority

Persons with signature authority over, but no financial interest in, a foreign financial account for which an FBAR would otherwise have been due June 30, 2010, will now have until June 30, 2011, to report those foreign financial accounts. The deadline of June 30, 2011, applies to FBARs reporting foreign financial accounts over which the person has signature authority, but no financial interest, for the 2010 and prior calendar years.

2. Certain Foreign Commingled Funds

Persons with a financial interest in, or signature authority over, a foreign commingled fund that is a mutual fund are required to file an FBAR unless another filing exception, as provided in the FBAR instructions or other relevant guidance, applies. The IRS 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 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 notice effectively provides a filing exception for interests in private equity funds and foreign hedge funds for calendar year 2009 and earlier calendar years.

While Notice 2010-13 does not address the future treatment of commingled funds, it states generally that mutual funds are required to file an FBAR.

3. FBAR-Related Questions on Federal Tax Forms

The notice provides any taxpayer who has no other reportable foreign financial accounts for the year in question and who qualifies for the filing relief provided in the notice, should check the “no” box in response to FBAR-related questions found on federal tax forms for 2009 and earlier years that ask about the existence of a financial interest in, or signature authority over, a foreign financial account.

All other requirements of the 2008 version of the FBAR form and instructions, as modified by Notice 2010-23, remain in effect until changed by subsequent guidance issued by the Treasury Department, including the IRS.

Comments

As a result of the recent guidance issued by the IRS, taxpayers should evaluate whether they are entitled to take advantage of the administrative relief provided under Notice 2010-23 and whether they may rely on the exception for filing under Announcement 2010-16. BKD, LLP can help taxpayers identify whether an FBAR filing obligation exists and determine whether the taxpayer qualifies for an extension to file the FBAR.

For further information and assistance with the changes to the FBAR filing requirements, please contact your BKD advisor.