Any U.S. person who has a financial interest in or signature authority over foreign bank accounts, the maximum value of which in aggregate is over $10,000 at any time during a year, must file a Form TD F 90.22-1, Report of Foreign Bank and Financial Accounts (FBAR), by June 30 of the following year. Recent changes to the FBAR instructions had left taxpayers and practitioners with questions about who is required to file the form.
Signature Authority
One area of confusion involves those who have signature authority over, but no financial interest in, these types of accounts. According to the FBAR instructions, “A person has signature authority over an account if such person can control the disposition of money or other property in it.” This covers anyone who can sign a check or instruct a wire transfer from a foreign account.
Such a definition would include the finance department of a company that has foreign accounts. Often the controller or head of the finance department of a U.S. company can sign checks or otherwise make transfers but has no actual foreign interest. This led practitioners to question whether every controller (or other person with signature authority over a company’s accounts) that is a U.S. person must file the FBAR, even if it is simply a function of his or her employment, and even though the company would already file one on those same accounts.
Commingled Funds
There is also confusion as to whether an owner of a commingled fund, such as a mutual fund, that has foreign holdings should file the FBAR. The FBAR instructions note that the term “financial account” includes assets that are held “in a commingled fund, and the account holder holds an equity interest in the fund (including mutual funds).”
A mutual fund may have a mix of foreign and domestic holdings. This led practitioners to question whether an account owner that has more than $10,000 in mutual funds must investigate every mutual fund to determine the fair value of domestic and foreign holdings within the fund.
Notice 2009-62
Because of this confusion, the IRS was concerned that some persons in the above situations may have missed the June 30, 2009, FBAR filing deadline. To give itself time to address these issues, in early August the IRS released Notice 2009-62, which extends the time for filing an FBAR for those in the above situations. The notice allows up to June 30, 2010, to file an FBAR for any calendar year from 2008 and earlier for those persons with (1) “signature authority over, but no financial interest in, a foreign account” or (2) “a financial interest in, or signature authority over, a foreign commingled fund.”
At the same time, the notice invited comments over future regulations related to the above two types of account holders.
EditorNotes
Mark Cook is a partner at Singer Lewak LLP in Irvine, CA.
Unless otherwise noted, contributors are members of or associated with Singer Lewak LLP.The editor would like to offer a special thanks to Jennifer Allison, J.D., for her assistance with this column.
For additional information about these items, contact Mr. Cook at (949) 261-8600, ext. 2143, or mcook@singerlewak.com.
