Forms Issued for U.S. Mandatory Foreign Direct Investment Reporting
March 9, 2018
On March 5, 2018, the U.S. Department of Commerce's Bureau of Economic Analysis (BEA) issued its mandatory five-year benchmark survey to obtain data on foreign direct investment (FDI) in the United States. The survey, known as the BE-12 survey, is required for U.S. businesses in which a foreign entity or person holds, directly or indirectly, 10 percent or more of the U.S. business' voting interests at any time during 2017 or an equivalent share in an unincorporated enterprise. The completed survey is due to BEA on or before May 31, 2018, and qualifying businesses must file regardless of whether contacted by BEA. The reporting period is one year, and for this BE-12 survey, the reporting period is the entity's fiscal year that ended in 2017.
A. Who Needs to File
A BE-12 survey is to be filed when one foreign person holds 10 percent or more of the voting shares of a "U.S. affiliate." If no one foreign person holds 10 percent or more of the voting securities, then a U.S. affiliate only needs to file a BE-12 survey if contacted by BEA. Thus, a U.S. affiliate does not aggregate the ownership percentages of its foreign investors or owners for the purposes of determining whether to file a BE-12 survey. The BE-12's definitions of a U.S. affiliate and business enterprise illustrate the breadth of the filing requirement.
- A U.S. affiliate covers a "business enterprise" located in the U.S. that is owned, 10 percent or more, directly or indirectly, by a foreign person.
- A business enterprise is "any organization, association, branch, or venture that exists for profit-making purposes or to otherwise secure economic advantage, and any ownership of real estate."1
Thus, the filing requirement captures many U.S. businesses, including private investment funds and a foreign person simply owning real estate in the U.S. for other than personal use. BEA has implemented an exemption for U.S. private funds; the exemption generally covers a private fund that (i) does not own, directly or indirectly, an operating company and (ii) for which no U.S. operating company exists in the chain of ownership between the foreign investor and the U.S. private fund. For BE-12 survey purposes, an operating company is a business enterprise that is not a private fund or a holding company. Thus, certain U.S. private funds will be required to file a BE-12 survey.
B. What Needs to Be Filed
There are four versions of the survey: BE-12A, BE-12B, BE-12C, and the BE-12 Claim for Not Filing. The specific version that a U.S. affiliate must file is determined by the size of the U.S. affiliate and its percentage of foreign ownership, as further described below.
- The BE-12A is filed for a U.S. business that is majority owned by a foreign parent2 and has assets, sales, or net income (loss) that exceeds $300 million (positive or negative).
- The BE-12B is filed for a U.S. business that satisfies one of the following criteria:
- it is majority owned by a foreign parent with one of assets, sales, or net income (loss) that exceeds $60 million (positive or negative) but none of these exceed $300 million.3
- it is minority owned by a foreign parent with one of assets, sales, or net income (loss) that exceeds $60 million.
- The BE-12C is filed for a U.S. business with all of assets, sales, or net income (loss) of $60 million or less.
- The BE-12 Claim for Not Filing is filed if (i) foreign ownership of the U.S. business has fallen below 10 percent in 2017, (ii) the U.S. business has been fully consolidated or merged into another U.S. business, (iii) the U.S. business has been liquidated or dissolved, or (iv) was contacted by BEA but otherwise had no obligation to file.
At a general level, the information required by a BE-12 survey includes identification of foreign parents, major products and/or services provided by the U.S. business, sales or gross operating revenues, balance sheet information, income and employment information, and financial and operating data for the U.S. business. Also, the BE-12 survey should be completed on a consolidated basis, with a single submission for all U.S. business enterprises sharing common ownership.
C. When to File
As stated above, the completed survey is due to BEA on or before May 31, 2018. However, BEA has extended the filing deadline to by June 30, 2018, for surveys being submitted through BEA's e-file system. BEA may impose civil and/or criminal penalties for failure to submit the BE-12 survey. The BEA surveys are confidential and may be used only for statistical and analytical purposes and may not be used for taxation, investigation, or regulatory purposes.
If you have a question regarding the BEA reporting obligations, please contact Josephine Aiello LeBeau (email@example.com), Daniel Glazer (Daniel.Glazer@wsgr.com), Melissa Mannino (firstname.lastname@example.org), or Anne Seymour (email@example.com). The BE-12 survey forms can be found here. Wilson Sonsini Goodrich & Rosati is happy to assist you in your review or completion of the BE-12 survey.