As we have previously written about, reporting under the Corporate Transparency Act (“CTA”) will go into effect January 1, 2024. Before we get to the first CTA reporting, we note the deadline for another important non-tax filing with the Bureau of Economic Analysis (the “BEA”) is right around the corner. As a reminder, the next filing in the BEA filing cycle is the Form BE-12 Benchmark Survey (the “BE-12”), which is conducted once every five years. The next BE-12 filing is due by May 31, 2023 (or by June 30, 2023 for reporters using the BEA’s e-filing system) covers the fiscal year ending in 2022, and also requires the reporting of certain foreign direct investments in the United States.
The BE-12 is a mandatory and confidential filing under the International Investment and Trade in Services Survey Act (the “Act’). Failure to timely file the BE-12 can trigger civil and criminal penalties, with civil penalties up to $55,808 (adjusted for inflation).
An automatic extension of the filing deadline is not available to filers, but the BEA has indicated it will grant “reasonable requests” for extension. Thus, it can be easily confused that this reporting is not connected with deadlines for U.S. federal tax return filings.
What is the BE-12?
As background, the BEA conducts various periodic surveys to track international transactions, inbound2 and outbound direct investments, and the activities of multinational enterprises (“BEA Surveys”). The purpose of BEA Surveys is to collect statistical data to measure the scale of such transactions, investments and activities in order to gauge their effect on the United States economy and the role of the United States in the global economy.
Several BEA Surveys exist for the collection of data on foreign direct investment in the United States.3 The BE-12 is the most comprehensive of such surveys and applies to each U.S. affiliate of a foreign person.4
Who Must File the BE-12?
A BE-12 is required for each U.S. affiliate, i.e., for each U.S. business enterprise in which a foreign person or entity owned or controlled, directly or indirectly, 10 percent or more of the voting securities if an incorporated U.S. business enterprise, or an equivalent interest if an unincorporated U.S. business enterprise, at the end of the business enterprise’s fiscal year that ended in calendar year 2022. A “business enterprise” generally means any organization, association, branch, or venture which exists for profit making purposes or to otherwise secure economic advantage.
The BE-12 has 4 separate forms. There is no dollar threshold for reporting a U.S. affiliate, but it does impact which BE-12 form to file. Special rules apply for consolidated reporting when there is more than one U.S. affiliate within a multi-tiered business structure.
If a BE-12 is not required to be filed there could still be a requirement to file Form BE-12 Claim for Not Filing (a “Claim for Not Filing”) under certain circumstances. A Claim for Not Filing is required for (1) a U.S. affiliate that is consolidated into or merged with another U.S. affiliate, or (2) an entity that is not directly or indirectly foreign-owned. Also, a Claim for Not Filing should be filed if the U.S. affiliate’s foreign ownership fell below 10% or if it was liquidated or dissolved before the end of the relevant fiscal year.
Application of BE-12 to U.S .Real Estate Investments
It is common for non-U.S. individuals and companies to invest in U.S. real estate, either directly or through structures. The BE-12 filing requirement specially carves in ownership of U.S. real estate by non-U.S. persons. For purposes of the Act, the direct or indirect ownership of U.S. real estate is treated as a U.S. business enterprise. As a result, U.S. real estate is by itself considered a U.S. affiliate of a non-U.S. person, and can easily include: (i) a single unit rental property which the owners use for part of the year and rent out the rest of the time; (ii) a multi-unit residential/commercial property which leases out apartments and/or retail space; or (iii) equity REITs that are primarily engaged in leasing buildings or other real estate properties to others.
While the Act seemingly focuses on reporting by companies that are U.S. affiliates, a non-U.S. individual would be required to file the BE-12 if they own any U.S. real estate in their personal name. This may be the case even if the non-U.S. individual does not have any U.S. federal income tax or reporting requirements. However, the non-U.S. individual owner would not need to report if such U.S. real estate is residential real estate held exclusively for personal use and not for profit making purposes. A residence that is an owner's primary residence, that is then leased by the owner while outside the United States, and the owner intends to reoccupy, is considered real estate held for personal use and therefore not subject to the reporting requirements.
It is usually recommended for a non-U.S. individual to own U.S. real estate through some type of U.S. and/or non-U.S. company structure to protect against probate administration on the death of the individual owner, creditor claims and U.S. federal estate tax exposure. Ownership of U.S. residential real estate by a corporation whose sole purpose is to hold the real estate for the personal use of the owner(s) of the corporation is considered real estate held for personal use and therefore not subject to the reporting requirements under the Act. Notably, the BE-12 filing guidance does not distinguish between corporations and other types of entities for this special rule. Thus, it is not clear if other common structures used by non-U.S. individuals to own U.S. real estate would be able to rely on this special provision (e.g., a single-member U.S. LLC owned 100%).
It may be possible that U.S. real estate is held through a trust structure.5 In such case, for purposes of determining if there is a foreign owner, a trust is treated as an “intermediary.” The beneficiaries of the trust are typically considered the owners. Notably, however, where (i) the trust includes a reversionary interest or (ii) if a corporation or other organization creates a trust, designating its shareholders or member as beneficiaries, then the settlors of the trust are deemed to be the owners.
 The BEA also requires the reporting of U.S. direct investments abroad. In particular, the Form BE-10 (the “BE-10”) is a benchmark survey that is conducted once every 5 years and applies to each foreign affiliate of a U.S. person. The next mandatory filing of the BE-10 will cover the fiscal year ending in 2024, and the filing will be due by May 31, 2025 (or by June 30, 2025 for reporters using the BEA’s e-filing system).
 BE-13 (Survey of New Foreign Direct Investment in the United States); BE-605 (Quarterly Survey of Foreign Direct Investment in the United States); BE-15 (Annual Survey of Foreign Direct Investment in the United States). With the exception of the BE-13, these additional surveys are not mandatory unless the foreign affiliate or U.S. affiliate, as the case may be, is notified by the BEA to file any such quarterly or annual filings.
 A “foreign person” is any individual, branch, partnership associated group, association, estate, trust, corporation or other organization that is resident in, or subject to, the jurisdiction of a country other than the United States. Special rules apply to determine one’s residence. Notably, the rules for U.S. federal tax residency are not applicable for purposes of determining residency.
 Under the Act, a foreign estate is treated as a foreign person and therefore the estate, rather than the beneficiaries, is considered the owner of any direct investments.