For some aeronautical aficionados the BE-12 is a Soviet Anti-submarine aircraft introduced in the 1960s. For just about everyone else the BE-12 is a census form that they’ve never heard of and will most likely never have to deal with. However, there is a small group of people who are required to fill out the BE-12 and the number of those persons who have never heard of it, is staggering.
The BE-12, also known as the benchmark survey, is a yearly census form that is used by the Department of Commerce for the purpose of documenting foreign business conducted in the United States. Every year the Bureau of Economic Analysis sends out multiple letters to foreign investors asking for basic information about their U.S. business dealings, whether they be in property, shares of stock, animal husbandry, gaming, etc. (There is an entire list of covered activities on the Bureau’s website.) If you are a foreign corporation that owns a Madison Avenue penthouse, and that penthouse is used by the owners of the corporation, and is not merely held for appreciation or rented out, this property would not be required to be reported on the BE-12. If that same corporation rented out the penthouse for a portion of the year, then it would be reportable. “Ownership of U.S. residential real estate by a corporation whose sole purpose is to hold the real estate for the personal use of the owner(s) of the corporation is considered to be real estate held for personal use and therefore not subject to the reporting requirements.” If the residential real estate is owned by a foreign individual and not a corporation, the rules are even more relaxed, if the real estate is the foreign individual’s primary residence and the owner wishes to lease it while they are out of the country but intends to reoccupy the residence at a later date, they are not required to file.
“If they are a foreign person, how can they have a primary residence in the U.S.?”
The answer is that a foreign person for the purpose of the BE-12 is not necessarily a non-U.S. person; they are merely someone living abroad.“An individual is considered a resident of, and subject to the jurisdiction of, the country in which he or she is physically located.” This means that if you are a U.S. citizen currently residing in Paris while learning to paint the Seine, and sending your paintings back to your studio in Pittsburgh for sale, you are required to file a BE-12.
“A BE-12 report is required for each U.S. affiliate, i.e., for each U.S. business enterprise in which a foreign person or entity owned or controlled, directly or indirectly, 10 percent or more of the voting securities if an incorporated U.S. business enterprise, or an equivalent interest if an unincorporated U.S. business enterprise, at the end of the business enterprise’s fiscal year that ended in calendar year 2017.”
This means that if you are a foreign person, (again this includes U.S. persons currently residing abroad) or foreign business and you own 10% or more of any U.S. enterprise, property, or entity for the purpose of making a profit, you are to fill out and return to the Bureau of Economic Analysis a BE-12 form when it has been requested of you.
“Well it hasn’t been requested of me, so I am free and clear; I will just deal with it if I ever get the form request.”
Wait, not so fast! Every 5 years, whether or not the Bureau requests it, if you are such an individual or business described above, you are required to fill out the BE-12 whether directly requested or not. That’s why I am telling you this, because it was due this year for all foreign persons with U.S. business income. In fact, it was due at the end of June, and there is a hefty fine for failure to file this report. “Whoever fails to report shall be subject to a civil penalty of not less than $4,527, and not more than $45,268, and to injunctive relief commanding such person to comply, or both. These civil penalties are subject to inflationary adjustments. Those adjustments are found in 15 CFR 6.4. Whoever willfully fails to report shall be fined not more than $10,000 and, if an individual, may be imprisoned for not more than one year or both. Any officer, director, employee, or agent of any corporation who knowingly participates in such violations upon conviction, may be punished by a like fine, imprisonment or both (22 U.S.C. 3105).”
“Why are you informing me of all of this now, after the due date, when I am potentially at risk for such large fines?”
Answer, it is still not too late to file. After having a discussion with an agent of the Bureau of Economic Analysis, they informed us that because so many people have never heard of the BE-12 before, and because it is such an obscure form, they rarely do assess fines (unless it was directly requested and you still failed to file), and what they ask is that even if it is after the due date, send it anyway. It’s the best way to protect yourself, and your business.
“If I file this form is it going to be given to the IRS, the Treasury department, or some other government agency?”
No. Remember, this is a census. The purpose of this form is statistical, and as much as one might want to think that the form is so the IRS or Department of Treasury can keep track of who owes them money, there is a statement of your rights against such use of your records. In the directions for filling out the form, there is a section titled Confidentiality and it states the following: “The Act provides that your report to this Bureau is CONFIDENTIAL (emphasis in document, not mine) and may be used only for analytical or statistical purposes. Without your prior written permission, the information filed in your report CANNOT (emphasis in document, not mine) be represented in a manner that allows it to be individually identified. Your report CANNOT (emphasis in document, not mine) be used for purposes of taxation, investigation, or regulation. Copies retained in your files are immune from legal process. Per the Cybersecurity Enhancement Act of 2015, your data are protected from cybersecurity risks through security monitoring of the BEA information systems.” Thus informing you that the information that you provide cannot be used against you for any purpose.
So do yourself a favor and file the form, if you have any questions, the website is very helpful, and so are the Bureau of Economic Analysis agents.
*All quoted text was taken directly from the Bureau of Economic Analysis Website. https://www.bea.gov/surveys/respondent_be12_be15.htm