The Hedge Fund Law Report

The definitive source of actionable intelligence on hedge fund law and regulation

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By Topic: Reports of Foreign Bank and Financial Accounts

  • From Vol. 5 No.26 (Jun. 28, 2012)

    Hedge Funds and Managers Must File Foreign Bank Account Reports by June 30, 2012

    Every U.S. person or entity that had either a financial interest in, or signatory authority or other authority over, a financial account in a foreign country must file Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts), commonly referred to as an “FBAR,” if the aggregate value of such account(s) exceeded USD $10,000 at any time during calendar year 2011.  In a guest article, Joseph Pacello, a tax principal at Rothstein Kass, and Deirdre Joyce, a senior international tax manager at Rothstein Kass, discuss, with respect to FBAR filings: imminent filing deadlines; key definitions; notable changes for 2010 and subsequent year reporting; FBAR constructive ownership rules; significant penalties for failure to file; the 2012 offshore voluntary disclosure program; six specific examples of FBAR reporting requirements; and filing instructions.  The article concludes with a chart comparing Form 8938 and FBAR filing requirements.

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  • From Vol. 2 No.38 (Sep. 24, 2009)

    Holtz Rubenstein Reminick Hosts Conference on “Uncovering Foreign Income: The Implications and Consequences of Foreign Bank Account Reporting”

    On September 16, 2009, the accounting firm Holtz Rubenstein Reminick (HRR) hosted a seminar on reporting of foreign bank accounts, for both income tax and anti-money laundering purposes.  Reporting on foreign income has become headline news of late.  Notably, in February 2009, UBS, the largest Swiss bank by assets, reached a settlement with the U.S. Internal Revenue Service (IRS) in which UBS agreed to give the IRS hundreds of names of Americans suspected of using UBS accounts to evade U.S. income taxes.  Several UBS clients have been prosecuted. The HRR seminar was chiefly designed to address the issue of whether people who have accounts with UBS or other foreign banks should make voluntary disclosure to the IRS of the existence of such accounts and other data with respect to such accounts.  Panelists also briefly discussed the still-undecided issue of whether an interest in an offshore hedge fund must, under the Bank Secrecy Act, be reported in a Report of Foreign Bank and Financial Accounts (FBAR).  See “IRS Indicates that U.S. Persons May be Required to Report Interests in Offshore Hedge Funds in Reports of Foreign Bank and Financial Accounts,” The Hedge Fund Law Report, Vol. 2, No. 26 (Jul. 2, 2009).  We detail the relevant points from the conference.

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  • From Vol. 2 No.26 (Jul. 2, 2009)

    IRS Indicates that U.S. Persons May be Required to Report Interests in Offshore Hedge Funds in Reports of Foreign Bank and Financial Accounts

    On June 12, 2009, in the course of a teleconference jointly sponsored by the American Bar Association and the American Institute of Certified Public Accountants, Internal Revenue Service (IRS) officials stated that a U.S. person’s equity interest in offshore hedge funds (as well as offshore mutual funds and similar pooled investment vehicles) constitutes a foreign financial account.  Under this view, U.S. persons with investments in offshore hedge funds would be required to file Treasury Form TD F 90-22.1, the Report of Foreign Bank and Financial Accounts (FBAR) with respect to such interests.  In recent guidance, the IRS clarified that certain U.S. persons will have until September 23, 2009 to file FBARs in respect of 2008 calendar year.  The IRS officials on the call framed the interpretation as a “clarification” of the existing filing regime, but the interpretation nonetheless took the hedge fund community by surprise: heretofore, U.S. persons with interests in offshore hedge funds generally had not filed FBARs based solely on those interests.  While the filing is not terribly onerous, the new interpretation may be understood as part of the federal government’s more general effort to obtain more information about hedge funds.  However, this move is different from recent hedge fund regulation bills in Congress or the Obama administration’s proposals in that while those efforts focus on obtaining information from hedge fund managers, this new and more expansive understanding of the range of required FBAR filers focuses on hedge fund investors.  The primary concern it raises – other than the surprise factor and the danger of accidentally tripping up an evolving rule that can result in liability – is that at the margin, the required disclosures will serve as a disincentive for required filers to invest in offshore hedge funds.  One of the historic attractions of investments in offshore hedge funds was the relative anonymity they offered to investors.  To a degree, the IRS’ new interpretation cuts back on the opportunity for anonymity.  We discuss the new IRS interpretation in detail, and offer, among other things, relevant excerpts from the transcript of the call in which the IRS espoused its new interpretation.

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