The BEA Survey of Foreign-Owned Businesses Is Coming Around Again
February 23, 2023
Client Alert
By: Chris Griner, Shannon Reaves, Tom Firestone, Christopher R. Brewster, Gregory Jaeger, Andrew J. Astuno, Erin Bruce Iacobucci
A Mandatory Quinquennial BE-12 Benchmark Survey Awaits Many Foreign-Owned U.S. Businesses.
Many foreign-owned U.S. businesses will soon be required to complete and return a survey form to the U.S. Bureau of Economic Analysis (“BEA”), a division of the U.S. Department of Commerce.[1] Specifically, any U.S. business (except certain private funds, as described below) in which a foreign person owns 10 percent or more of its voting interests must complete and return the BE-12 Benchmark Survey.[2]
The BE-12 Survey comes around every five years. It covers years ending in 2 (notably, 2022) and 7; the new survey, yet to be released, is due to the BEA by May 31 -- or by June 30, 2023 if submitted electronically. BEA, one of the world’s leading statistical agencies, produces economic statistics on a non-partisan basis concerning the performance of the U.S. economy. Upon evaluation and aggregation of the survey results, BEA will publish a summary report, similar in format to its 2020 reporting of economic statistics concerning foreign-owned companies (including employment data, economic performance (“value added” metrics), and aggregate data of foreign-ownership interests, by country).
The 2020 report summarized the 2020 BE-15 survey, an annual survey that must be completed by certain larger foreign-owned U.S. businesses, specifically those that realized at least $40 million for the most recent calendar year in assets, sales or net income (including loss). Separately, yet another survey -- the BE-13 survey -- must be completed by a U.S. business when it is first established or acquired[3] by a foreign person.
Who Must Complete the BE-12 Survey?
With limited exceptions, any U.S. business in which a foreign person[4] owns at least 10 percent of its voting interests must complete and return the BE-12 survey. The exact form to be filed depends on several factors, including whether the U.S. business is majority-owned by a foreign person, and the value of any one of its assets, sales or net income (including loss) as of December 31, 2022. A business that is majority-owned by a foreign person (e.g., 60% of its voting interests are owned by a foreign pension fund) and that realized over $300 million in net income for calendar year 2022, must file the upcoming Form BE-12A. By contrast, a business that is only minority-owned by a foreign person must complete and return the upcoming Form BE-12B, unless any one of its assets, sales or net income (including loss) for 2022 was less than $60 million, in which case it must file the upcoming Form BE-12C.
Again, all U.S. businesses subject to the reporting requirements must file. A covered U.S. business that fails to file is subject to civil penalties. The previous benchmark survey (covering 2017) subjected non-filers to civil penalties ranging up to an inflation-adjusted level just over $45,000. Newly adjusted penalty levels will be announced with the publication of the 2022 form. Willful violations can carry criminal penalties.
Certain Private Funds Are Exempt
A U.S. business that meets ALL of the following criteria is not required to file a BE–12 report except to indicate exemption from the survey (and then only if contacted by BEA):
- It is a private fund;
- The fund does not own, directly or indirectly, an “operating company” (i.e., an enterprise that is neither a private fund nor a holding company) in which the foreign person (defined at Title 31 as the “foreign parent”[5]) owns at least 10 percent of the voting interest; and
- The foreign parent owns the private fund indirectly and there are no U.S. “operating companies” (intermediate entities) between the foreign parent and the indirectly owned private fund.[6]
What Information Must Be Provided?
Similar to BEA’s 2017 benchmark survey, the upcoming 2022 survey will require respondents to provide a rather broad set of information and data concerning their recent financial performance and degree of foreign ownership. A majority of the requested financial data (including the values of the respondent company’s assets, revenues, and certain expenditures) should be determined upon review of the U.S. operating business’ accounting records. The requested foreign-ownership information (covering both the “voting interest” and “equity interest” of the U.S. business) likely may be found in the business’ shareholder register, or related constituent documents. (Note, the pertinent regulations have indicated that Form BE-12A will become more detailed this year; certain questions will be added concerning the income of “unconsolidated U.S. affiliates” as well as sales data “…related to services generally recognized as prevalent in the digital economy.”[7])
Stay Tuned for the Official Release of the BE-12 Forms
Companies subject to the BE-12 reporting requirement are encouraged to check the BEA website to find a copy of the relevant form when it is published (or to contact our office to discuss its status) so that there will be sufficient time to complete the filing process. It is important to note that the information provided to BEA in the survey response may only be used by BEA for statistical and analytical purposes. BEA is prohibited by law from granting another agency access to its survey responses for tax, investigative, or regulatory purposes.
Please contact our team members if you have any questions concerning the forthcoming BE-12 filing process, ongoing compliance with the annual BE-15 filing requirement, and/or the initial BE-13 filing process.
[1] See 15 C.F.R. § 801, available at: https://www.govinfo.gov/content/pkg/FR-2022-09-29/pdf/2022-21113.pdf
[2] See https://www.bea.gov/system/files/2022-02/Which-form-do-I-file.pdf
[3] The standard for being “acquired” concerning the BE-13 survey is the same as it relates to the BE-12 survey: at least 10 percent of the U.S. business’ voting securities are owned by a foreign person.
[4] See 22 C.F.R. § 120.16 - Foreign person means any natural person who is not a lawful permanent resident as defined by 8 U.S.C. § 1101(a)(20) or who is not a protected individual as defined by 8 U.S.C. § 1324b(a)(3). It also means any foreign corporation, business association, partnership, trust, society or any other entity or group that is not incorporated or organized to do business in the United States, as well as international organizations, foreign governments and any agency or subdivision of foreign governments (e.g., diplomatic missions).
[5] See 31 C.F.R. § 129.2(f) – Foreign parent means any foreign person who owns or controls, directly or indirectly, 10 percent or more of the voting securities of an incorporated United States business enterprise, or an equivalent interest in an unincorporated United States business enterprise.
[6] See 15 C.F.R. § 801.10(b).
[7] See Description of Changes at 15 C.F.R. § 801.
February 23, 2023
Client Alert
By: Chris Griner, Shannon Reaves, Tom Firestone, Christopher R. Brewster, Gregory Jaeger, Andrew J. Astuno, Erin Bruce Iacobucci
A Mandatory Quinquennial BE-12 Benchmark Survey Awaits Many Foreign-Owned U.S. Businesses.
Many foreign-owned U.S. businesses will soon be required to complete and return a survey form to the U.S. Bureau of Economic Analysis (“BEA”), a division of the U.S. Department of Commerce.[1] Specifically, any U.S. business (except certain private funds, as described below) in which a foreign person owns 10 percent or more of its voting interests must complete and return the BE-12 Benchmark Survey.[2]
The BE-12 Survey comes around every five years. It covers years ending in 2 (notably, 2022) and 7; the new survey, yet to be released, is due to the BEA by May 31 -- or by June 30, 2023 if submitted electronically. BEA, one of the world’s leading statistical agencies, produces economic statistics on a non-partisan basis concerning the performance of the U.S. economy. Upon evaluation and aggregation of the survey results, BEA will publish a summary report, similar in format to its 2020 reporting of economic statistics concerning foreign-owned companies (including employment data, economic performance (“value added” metrics), and aggregate data of foreign-ownership interests, by country).
The 2020 report summarized the 2020 BE-15 survey, an annual survey that must be completed by certain larger foreign-owned U.S. businesses, specifically those that realized at least $40 million for the most recent calendar year in assets, sales or net income (including loss). Separately, yet another survey -- the BE-13 survey -- must be completed by a U.S. business when it is first established or acquired[3] by a foreign person.
Who Must Complete the BE-12 Survey?
With limited exceptions, any U.S. business in which a foreign person[4] owns at least 10 percent of its voting interests must complete and return the BE-12 survey. The exact form to be filed depends on several factors, including whether the U.S. business is majority-owned by a foreign person, and the value of any one of its assets, sales or net income (including loss) as of December 31, 2022. A business that is majority-owned by a foreign person (e.g., 60% of its voting interests are owned by a foreign pension fund) and that realized over $300 million in net income for calendar year 2022, must file the upcoming Form BE-12A. By contrast, a business that is only minority-owned by a foreign person must complete and return the upcoming Form BE-12B, unless any one of its assets, sales or net income (including loss) for 2022 was less than $60 million, in which case it must file the upcoming Form BE-12C.
Again, all U.S. businesses subject to the reporting requirements must file. A covered U.S. business that fails to file is subject to civil penalties. The previous benchmark survey (covering 2017) subjected non-filers to civil penalties ranging up to an inflation-adjusted level just over $45,000. Newly adjusted penalty levels will be announced with the publication of the 2022 form. Willful violations can carry criminal penalties.
Certain Private Funds Are Exempt
A U.S. business that meets ALL of the following criteria is not required to file a BE–12 report except to indicate exemption from the survey (and then only if contacted by BEA):
- It is a private fund;
- The fund does not own, directly or indirectly, an “operating company” (i.e., an enterprise that is neither a private fund nor a holding company) in which the foreign person (defined at Title 31 as the “foreign parent”[5]) owns at least 10 percent of the voting interest; and
- The foreign parent owns the private fund indirectly and there are no U.S. “operating companies” (intermediate entities) between the foreign parent and the indirectly owned private fund.[6]
What Information Must Be Provided?
Similar to BEA’s 2017 benchmark survey, the upcoming 2022 survey will require respondents to provide a rather broad set of information and data concerning their recent financial performance and degree of foreign ownership. A majority of the requested financial data (including the values of the respondent company’s assets, revenues, and certain expenditures) should be determined upon review of the U.S. operating business’ accounting records. The requested foreign-ownership information (covering both the “voting interest” and “equity interest” of the U.S. business) likely may be found in the business’ shareholder register, or related constituent documents. (Note, the pertinent regulations have indicated that Form BE-12A will become more detailed this year; certain questions will be added concerning the income of “unconsolidated U.S. affiliates” as well as sales data “…related to services generally recognized as prevalent in the digital economy.”[7])
Stay Tuned for the Official Release of the BE-12 Forms
Companies subject to the BE-12 reporting requirement are encouraged to check the BEA website to find a copy of the relevant form when it is published (or to contact our office to discuss its status) so that there will be sufficient time to complete the filing process. It is important to note that the information provided to BEA in the survey response may only be used by BEA for statistical and analytical purposes. BEA is prohibited by law from granting another agency access to its survey responses for tax, investigative, or regulatory purposes.
Please contact our team members if you have any questions concerning the forthcoming BE-12 filing process, ongoing compliance with the annual BE-15 filing requirement, and/or the initial BE-13 filing process.
[1] See 15 C.F.R. § 801, available at: https://www.govinfo.gov/content/pkg/FR-2022-09-29/pdf/2022-21113.pdf
[2] See https://www.bea.gov/system/files/2022-02/Which-form-do-I-file.pdf
[3] The standard for being “acquired” concerning the BE-13 survey is the same as it relates to the BE-12 survey: at least 10 percent of the U.S. business’ voting securities are owned by a foreign person.
[4] See 22 C.F.R. § 120.16 - Foreign person means any natural person who is not a lawful permanent resident as defined by 8 U.S.C. § 1101(a)(20) or who is not a protected individual as defined by 8 U.S.C. § 1324b(a)(3). It also means any foreign corporation, business association, partnership, trust, society or any other entity or group that is not incorporated or organized to do business in the United States, as well as international organizations, foreign governments and any agency or subdivision of foreign governments (e.g., diplomatic missions).
[5] See 31 C.F.R. § 129.2(f) – Foreign parent means any foreign person who owns or controls, directly or indirectly, 10 percent or more of the voting securities of an incorporated United States business enterprise, or an equivalent interest in an unincorporated United States business enterprise.
[6] See 15 C.F.R. § 801.10(b).
[7] See Description of Changes at 15 C.F.R. § 801.
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