Overview of 3 types of reports required regarding foreign direct investment in the US
If a foreign person or company acquires, or owns, directly or indirectly ten percent (10%) or more of the voting interest of a US for-profit company or real estate, it is subject to the reporting requirements described below. (Real estate does not include a personal residence. The three types of reports which the Department of Commerce requires (subject to exemptions if the dollar amount is too low) are quarterly reports, annual reports, and benchmark reports (which must be filed every five years, the latest being 2007 and the next in 2012) (The initial investment survey by form BE-13 was discontinued in January 2009 and now is accomplished through the Quarterly Survey form BE-605 discussed below. The forms may be filed electronically via the website at www.bea.gov/surveys/fdiusurv.htm. They can also be filed in hard copy at the address indicated below for the Department of Commerce in Washington, D.C.
Quarterly Survey reporting requirements
Unless the total assets AND total sales AND gross revenue each equal $60 million, the only Quarterly Survey report has a section for Claim of Exemption on page 13 and a Certification and Person to Contact on page 15 on Form BE-605. It is a 15 page form (plus one page of definitions and contains about two pages worth of instructions) and compared to IRS tax forms is relatively straightforward. This form also acts as the initial investment survey for new acquisitions and newly created entities. Keep in mind that it is an informational return not designed to generate revenue. One must be honest, but an negligent error or estimate is not going to result in a penalty. It must be filed within 30 days after each quarter, except 45 days after the 4th
Annual Survey reporting requirements
Similar (but not identical) to the Quarterly Survey, unless the total assets AND total sales or gross revenue AND annual net income after provison for US income taxes, no Annual Survey must be filed, but instead a form BE-15 Claim of Exemption must be filed. The Claim of Exemption does not need to be refiled annually unless one is contacted by the Department of Commerce. If no exemption applies, then there are 3 variations of the Annual Survey, depending on large part on revenue. The two long term versions are 24 and 28 pages respectively and the short form EZ version (applicable to the lowest income companies,) is only 12 pages long. Again, much shorter than IRS forms because they are informatonal only.
Benchmark Survey reporting requirements
Every five years a comprehensive survey is conducted on a form BE-12. the next 5 year form will be in 2012, and the Bureau of Economic Analysis has stopped collecting data for the 2007 period. There are long forms, short forms, special forms for banks and a form for exemption, all available on the web site set forth below. Again, they are information returns, and while honesty is manditory, negligence is not punishable.
Consequence of not filing information surveys with Department of Commerce
While negligence is not punishable, failure to file is. Failure to file a required report or exemption from requirement of reporting is $2,500 per offense with a maximum penalty of $25,000. The Bureau of Economic Analysis can also obtian injunction relief requiring a company to make all missing filings. Willful failure to file is punishable by a $10,000 fine and potentially imprisonment of not more than one year. Any officer, director, employee or agent who knowingly participates in a knowing violation can also be fined the $10,000 and potentially imprisoned. Enforcement, as a practical matter is rare, but the potential consequences described above are obviously serious.
Practical Advice regarding Foreign Direct Investment reporting
If the company has an experienced employee who has previously completed the forms for another company, it may be possible to achieve compliance without the intervention of an attorney. If not, or for great assurance, the use of an experienced attorney is advisable. Finally, the Bureau of Economic Analysis at the phone number below is remarkably friendly and helpful, at least in this author's experience. Finally all data provides is confidential in nature and can only be used for analytic or statistical purposes. The undrelying law was originally enacted during the oil crisis of the 1970s when the US government wanted to monitor the inflow of foreign investment from the Middle East. The information disclosed by the filer cannot be disclosed in a manner that allows it to be individually identified to any third party. The report cannot be used for taxation, investigation, and the copies kept by the filing companies are immune from subpoena.