FinCen Finalizes the Proposed FBAR Regs
February 24, 2011Administrative Actions
So the 31 CFR §103.24 FBAR regulations became final on February 24,2011. The regulations are effective as of March 28, 2011. I personally had a modicum of hope that the final version would exempt interest in private equity, venture capital and hedge funds as reportable accounts, but that did not happen. On this issue, the final regulations basically adopt the proposed regulations. Section 103.24(c)(3)(iv)(B) provides, just as the proposed regulations, that “Other investment fund. [Reserved].” So in essence, for the time being, it appears that it is in IRS’ hands to resolve this issue. The regulations are not entirely without guidance regarding non-mutual funds such as private equity funds. The preamble to the regulations addresses a concern by practitioners that some private equity funds and hedge funds with periodic redemptions could fall within the definition of a “mutual fund” and thus be expressly subject to FBAR reporting. In an attempt to alleviate the concern, the preamble points out that the definition of “mutual fund” has “a requirement that the shares be available to the general public” in addition to the other requirements enumerated in the regulations. The preamble further goes on to point out that the treatment of other investment funds is reserved. What does all of this mean? Well, it means that as a precautionary matter, it may still be recommendable to file protectively. This is in light of the fact that Notice 2010-23 provides relief to investors in private equity, venture capital and hedge funds only for 2009 and prior years. The regulation is attached below.