Press Room: Tax Release

February 24, 2011

Foreign Bank Account Reporting (FBAR)

FINCEN FINALIZES FBAR REGULATIONS – REPORTING FOR OWNERSHIP INTERESTS IN FOREIGN HEDGE AND PRIVATE EQUITY FUNDS

Treasury's Financial Crimes Enforcement Network (FinCEN) issued the final rules governing the filing of FBAR forms (TD 90.22-1) by U.S. persons who have "a financial interest in, or signature or other authority over a...financial account in a foreign country."

The final regulations continue to "reserve" on the question of whether an interest in a foreign private equity or hedge fund constitutes a foreign financial account necessitating the filing of an FBAR.

Hopefully, this will lead IRS to extend the present moratorium (IRS Notice 2010-23) on filing FBARs for interests in offshore private equity and hedge funds to include the filings for the year 2010, which would otherwise be due on June 30, 2011.

HIRE Act Informational Reporting

It should also be noted that the new reporting obligation imposed by the HIRE Act on U.S. taxpayers with respect to certain non-U.S. financial assets (including foreign hedge funds, foreign private equity funds and other foreign investment vehicles), which comes into force in 2011, is not affected by any moratorium on FBAR filings.

U.S. taxpayers with defined investments in “foreign” assets will have additional informational reporting requirements for investments existing in 2011.