For those not familiar with Form TDF-90-22.1 Foreign Bank Account Report (FBAR – also called the FUBAR and other names which cannot be reprinted here), it is a form that requires any US entity to list its foreign account holdings. A by-product of the Bank Secrecy Act and supposedly designed to prevent or detect money laundering overseas, the FBAR is required to be filed not just by actual owners of foreign accounts but also by those with signature authority even if they do not have any actual ownership interest. Under the strict definition previously adopted by the IRS, foreign hedge funds owned by many nonprofits as a part of their endowment were required to report. Also, nonprofit managers and Board members with signature authority over such accounts were required to personally submit these forms.
The IRS has issued notice #2010-23 relating to the FBAR filing. The bad news is that they did not do away with this ridiculous form altogether. The good news is that they have now excluded illiquid foreign hedge funds and private equity funds from the reporting requirement. Also, for individuals with signature authority but no financial interest in a foreign account that is reportable (i.e. a cash or equity account or mutual fund), the deadline for years 2009 and earlier has been extended from June 30, 2010 to June 30, 2011. Hopefully this will give the IRS time to completely come to their senses with respect to this requirement and eliminate it. Anyway, it’s nice to see a modicum of common sense applied from time to time.
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