Friday, June 3, 2011
Time Running Out to Comment on FBAR Rules
On February 26, Treasury's Financial Crimes Enforcement Network (FinCEN) published in the Federal Register proposed regulations that would clarify who is required annually to file the FBAR. For those not in the know, "FBAR" is shorthand for Treasury Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts. BNA subscribers can find it discussed in 947 T.M., Reporting Requirements Under the Code for International Transactions , chapter XIII.
The FBAR has been in the news of late, because the IRS has used it as an enforcement tool in its effort to uncover foreign financial accounts that are owned or controlled by U.S. taxpayers. The penalties for failure to file the FBAR are severe and the IRS used the threat of those penalties to smoke out thousands of foreign account holders in its FBAR settlement program that expired in October 2009.
Treasury's authority to require FBAR reporting stems from the 1970 Bank Secrecy Act, not the Internal Revenue Code. It was not until 2003 that FinCEN delegated FBAR enforcement authority to the IRS, although interpretative authority remains at Treasury.
The recent proposed regulations are Treasury's first attempt to define (other than in instructions to the form) who must file the FBAR and what they must report. Portions of the regulations assert broad authority to require reporting; for example, both the record owner and the beneficial owner of a foreign financial account have independent filing requirements. The proposed regulations also require reporting of foreign annuities and cash value life insurance policies. But Treasury backed down in other areas -- it decided not to require reporting of interests in foreign private equity funds and hedge funds, citing legislative proposals that would require increased regulation of these entities.
The public comment period for the regulations is short -- the deadline is April 27, 2010. Anyone with an interest in this area should read the proposed regulations and provide comments soon.
Harold W. Pskowski
Managing Editor, U.S. International
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