On August 7, 2009, the Internal Revenue Service (“IRS”) issued Notice 2009-62, which announced a limited extension from September 23, 2009 until June 30, 2010 of the previously extended deadline for filing Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts, commonly known as the “FBAR”) for 2008 and prior calendar years. This new extension only applies to two specific groups of U.S. persons, as described below.
In general, any U.S. person who holds a financial interest in, or has signature or other authority over, foreign financial accounts with an aggregate value exceeding $10,000 at any time during a calendar year is required to file an FBAR with the U.S. Treasury Department by June 30 of the following calendar year. As described in our June 26, 2009 Client Alert "FBAR Reporting Obligations With Respect to Offshore Hedge Funds and Private Investment Funds," there has been substantial confusion regarding the scope of this requirement. In partial response, Notice 2009-62 extends the filing deadline with respect to two groups of U.S. persons.
First, the Notice extends the deadline for U.S. persons who have signature authority over, but no financial interest in, foreign financial accounts. This extension applies with regard to accounts of any type, including bank accounts and interests in investment funds.
Second, the Notice extends the deadline for U.S. persons who have a financial interest in, or signature authority over, a foreign commingled fund. This extension is particularly significant in light of statements made by the IRS in June indicating their view that the term “foreign commingled fund” includes hedge and other private investment funds organized outside the United States.
In guidance issued on May 6, 2009 and June 24, 2009, the IRS provided relief to persons who had only recently learned of their FBAR obligations, generally setting forth certain conditions and procedures under which they could file delinquent FBARs by September 23, 2009 and avoid penalties. The extension announced in Notice 2009-62 supplements that prior relief. All U.S. persons covered by Notice 2009-62 now have until June 30, 2010 to file FBARs for 2008 and prior calendar years.
In providing this relief, the Treasury Department also announced that it intends to issue regulations clarifying the FBAR filing requirements pertaining to those persons for whom it has extended the filing deadline, and has solicited comments relating to such future regulations. In particular, the Treasury Department has requested comments regarding whether relief from filing would be appropriate for persons with signatory authority over, but no financial interest in, a foreign financial account if a person with a financial interest in the account has filed an FBAR, including whether certain exceptions for officers and employees of banks and certain publicly traded companies might be expanded to all officers and employees who have signatory authority over, but no financial interest in, an employer’s foreign financial account(s).
With respect to offshore hedge funds and other private investment funds, the Treasury Department has requested comments concerning when an interest in a foreign entity (e.g., a corporation, partnership, trust or estate) should be subject to FBAR reporting. In particular, the Treasury Department has asked for views as to whether, and in what manner, the principles applied in determining whether a corporation is a “passive foreign investment company” (or “PFIC”) for federal income tax purposes should be applied to determine whether an interest in a foreign entity should be subject to FBAR reporting. Comments also are requested on whether U.S. persons should be relieved of FBAR filing requirements with respect to a foreign commingled fund in other circumstances, such as when a filing would be duplicative of other reporting.
Notice 2009-62 does not affect the filing obligations of U.S. persons with financial interests in foreign bank accounts and other traditional types of foreign financial accounts. Nor does it address many outstanding issues with respect to how the FBAR reporting requirements apply with respect to such foreign accounts. It is hoped the Treasury Department might issue additional guidance prior to the September 23, 2009 extended deadline with respect to some of these outstanding issues.