Certain definitions are critical when determining whether an obligation exists to file a “Report of Foreign Bank and Financial Accounts” (FBAR):

  • The term “financial account” generally includes bank accounts, security accounts, security derivatives or other financial instruments accounts (including foreign mutual funds, debit cards or prepaid credit card accounts). The term also may include foreign hedge funds and foreign private equity funds.
  • The term “U.S. person” means:
    1. a citizen or resident of the United States;
    2. a domestic partnership;
    3. a domestic corporation; or
    4. a domestic estate or trust.1
  • “Financial interest”: a U.S. person has a financial interest in a foreign account if:
    • the U.S. person is the owner of record or has legal title to the account;
    • the owner of record or the holder of legal title is a person acting as an agent, nominee, attorney or in some other capacity on behalf of the U.S. person;
    • the owner of record or the holder of legal title is a corporation, partnership or a trust in which:
      1. in the case of a corporation, the U.S. person owns (directly or indirectly) more than 50 percent of the value or voting power of all shares of stock of the corporation;
      2. in the case of a partnership, the U.S. person owns (directly or indirectly) more than 50 percent of the profits or capital interests of the partnership; or
      3. in the case of a trust, the U.S. person has a present beneficial interest (directly or indirectly) in more than 50 percent of the trust's assets or receives more than 50 percent of the current income; or
    • the owner of record or holder of legal title is a trust that was established by the U.S. person and for which a trust protector (that is to say, a person responsible for monitoring the activities of a trustee) with the authority to influence the trustee or remove and replace the trustee) has been appointed.
  • A person has “signature authority” over a financial account if that person can control the disposition of money or other property in the account through the delivery of a document containing a signature to the institution with which the account is maintained or can exercise comparable authority by communication with the institution through another person.

Endnote

  1. This definition of “U.S. person” is actually the definition described in the prior “Report of Foreign Bank and Financial Accounts” (FBAR) form. On the new FBAR form, issued in October 2008, a “U.S. person” is defined with reference to definitions in 31 C.F.R. 103.11(z) (the definition of “person”) and 31 C.F.R. 103.11(nn) (the definition of “United States”). For example, in 31 C.F.R. 103.11(z), a person is defined as “[a]n individual, a corporation, a partnership, a trust or estate, a joint stock company, an association, a syndicate, joint venture, or other unincorporated organization or group, an Indian Tribe (as that term is defined in the Indian Gaming Regulatory Act), and all entities cognizable as legal personalities.” The “United States” is defined in 31 C.F.R. 103.11 as “[t]he States of the United States, the District of Columbia, the Indian lands (as that term is defined in the Indian Gaming Regulatory Act), and the Territories and Insular Possessions of the United States.” Needless to say, the definition of “U.S. person” on the new FBAR form caused significant confusion. With the filing deadline looming, in June 2009, the Internal Revenue Service suspended the new definition of “U.S. person” for 2008 FBAR forms.