If a foreign investor acquires at least a 10% voting control of a United States commercial real estate property, in addition to income tax filings, they will be required to file information forms with the United States Department of Commerce, Bureau of Economic Analysis (“BEA”). These reports filed by the foreign investors are not made available to the public, instead they are used by the Commerce Department to compile data on foreign investment in United States real estate under strict confidentiality and nondisclosure guidelines and will be included in official U.S. economic statistics. The filed forms also cannot be used by the government for tax audit purposes or any other investigation. Fines for not filing these forms can be as high as $45,000 per form. Our experience has been that the Commerce Department does not levy these fines, but these forms should be filed nevertheless, even if they are being filed late, to maximize compliance. Most of these forms can be e-filed and there is no government filing fee required.

One. New Investment Survey. When there is a new foreign investment in U.S. real estate with foreign direct or indirect voting control of 10% or more, the U.S. Department of Commerce Form BE-13A must be filed. The form provides statistics on the investment, such as the purchase price of the real estate, projected annual revenue, projected net income, amount of foreign debt and foreign equity contributions to fund the purchase. The forms also require the percentage and country of foreign ownership. The form is due within 45 days of the deal’s closing. If the acquisition cost is under $3 million, an exemption has to be filed on Form BE-13, Claim for exemption.

Two. Quarterly Report. U.S. Department of Commerce BE-605 forms must be prepared quarterly to provide the information of certain transactions between the U.S. entity and its foreign parent, such as payables and receivables, and changes in equity interest. The entity reports the amount that represents the foreign parent’s share of the U.S. affiliate’s net income and the components of it. The foreign parent’s ownership percentage of the U.S. affiliate and foreign parent’s country must also be provided.

The BE-605 is only required if a foreign person owns at least 10% of the voting control of the U.S. affiliate and if the value of the assets, revenue, or net income or loss is at least $60 million. If the form is not required due to not meeting the threshold, a claim for exemption has to be requested on the form.

The form has to be filed only if the U.S. Department of Commerce informs the entity that it is required, and then it is due within 30 days of the end of the quarter.

Three. Annual Report. Each year, an annual information form must be filed with the Commerce Department regarding foreign investment in U.S. real estate based on the U.S. affiliate’s threshold level of assets, revenue and net income, if the foreign investor owns at least 10% of the U.S. affiliate directly or indirectly.

It provides annual statistical data on the total cost basis of all real estate holdings, annual revenue, interest expense, net income, foreign country ownership, a balance sheet and income statement, and transactions between affiliates.

If the affiliate’s threshold (assets, annual revenue, or net income) is under $40 million, then Form BE-15, Claim for exemption is filed. Between $40 million and $120 million, Form BE-15C is filed, between $120 million and $300 million, Form BE-15B , and if assets, annual revenue, or net income are more than $300 million, Form BE15A form is filed. These forms are due by May 31. The entity is only required to file this form if requested by the Commerce Department. The penalty for not filing this form is $45,000.

Four. Report every five years. Form BE-12 is due every 5 years for the benchmark survey, with the next one due in 2022. The BE-15 form is not required in the year Form BE-12 is filed. Form BE-12 is similar to Form BE-15, though more detailed information is requested. The due date is also May 31.

Foreign investors in U.S. real estate should coordinate with their internal or external accountants and attorneys and make sure the required United States Department of Commerce forms are timely filed.