Mandatory Reporting of foreign investment in the United States


The relative strength of the British pound against the dollar recently has brought the number of British redeem their property in the UK and transfer to the balmy climes of the United States such as Florida and California. Some have chosen to make the move to invest through E2 Treaty Investor visa program. Others have made the move by the US to their subsidiaries in the UK and move to the United States and the L-1A multinational managers.

Most of these individuals will make the required investments or acquisitions, completely unaware of a US law that requires them to report the transaction to the US Department of Commerce within 45 days. The civil penalty for failing to disclose such investment or acquisition can be fined from $ 2,500 to 25,000.00. The following article will give the reader a brief overview of the first disclosure.

II. The International Investment and Trade in Services Survey Act (“IITSSA”)

The International Investment and Trade in Services Survey Act (IITSSA) is one of the main US Federal law governing the reporting of investments made in the United States of foreign investors. Under IITSSA and related regulations, necessary required by US business as a foreign entity acquires (directly or indirectly) through the current US partner, over 10% voting interest in the company, including the company resulting from the direct or indirect acquisition of a foreign entity from company part or entity of existing American business which is then organized as a separate legal entity, or current US subsidiary of a foreign person when it enters the US business or operating unit current US affiliate merge into its own operations.

mandatory report must be filed with the US Bureau of Commerce Economic Analysis (the “BEA”) no later than 45 days after the completion of such a transaction. Failure to file the mandatory report shows one to pay a fine of not less than $ 2,500.00, and not more than $ 25,000.00. Anyone who intentionally fail to report will be fined not more than $ 10,000.00. can be imprisoned, or both. Any officer, administrator, employee or agent of any company who knowingly participates in such violation of conviction, may be punished with the same fine, imprisonment, or both. The IITSSA provides that reported is confidential and may only be used for diagnostic or statistics.

There are, however, exemptions exemption claim must be filed if established or acquired the US business, as a group, has total assets of $ 3,000,000 or less and not 200 acres or more of us land, or a total purchase price with current US partner for the US business or business segment or entity it combines in its own operations of $ 3 million or less and does not include the purchase of 200 acres or more of us land. In addition, no report is required to file if the transaction involves residential property held for personal use and not for commercial purposes.

A report is also required of US persons assisting or intervenes in sale or purchase of, a foreign man, of 10 percent or more of voting interest in the US business, including real estate, or enter into joint ventures with foreigner to create a US business. A US man will be so notified only if the US person knows or has reason to believe that it is so foreign participation.

III. The Exon-Florio Provision

The Exon-Florio provision provides for auditing, research and possible suspension or blocking of certain mergers, acquisitions and takeovers that could threaten compromising US National Security. The Committee on Foreign Investment in the United States (“CFIUS”) has been delegated the authority to review and conduct research on mergers, acquisitions and takeovers where the transaction could result in foreign control of persons engaged in interstate commerce in the United States. Control refers to the ability to determine, directly or decide issues for the acquired company.

CFIUS has 30 days from the announcement of the transaction to review it and decide whether to proceed with the investigation. If the committee believes that it should undertake the study, it must be completed within 45 days of this decision. Within 15 days after the president must announce whether it is: (a) credible evidence that the buyer could take action to impair the national security of the United States, and (b) the other provisions of the Act can not afford the President with adequate and appropriate authority to protect national security. If both of these conditions are met, the President may take action as the President considers appropriate to suspend or prohibit trading.

IV. State reporting

In addition to Federal disclosure, many states have reporting statutes affecting foreign investment. California, for example, has laws on insurance and banking. New York has both reporting and tax requirements applicable to foreign fire insurance companies. Illinois has a disclosure for non-residents who own agricultural land. However, Illinois recently released many of the former specific reporting of foreign insurance companies. Arkansas has also disclosure requirements for foreign interest in agricultural land. These examples are not a complete summary of all the reporting law for listed status. Instead, they should serve as evidence in approvals known. Field in the state reporting statutes are mainly in agriculture and insurance, but the individual investor should be investigated to determine the local jurisdiction requires.

V. Conclusion

Many foreign investors and business persons to put operations in the US, mistakenly believe that their relations with the US Federal and state governments will be limited to the purchase of L1 or E2 Visa and filing annual US Federal income tax return. There are, however, several other important legal and financial formalities to monitor if a person remains in compliance with the law and avoid civil penalties and criminal charges. So the best advice is to it is always for individuals contemplating investment in the United States to engage the services of the American business lawyer and certified public accountant with extensive experience dealing with transnational issues, such as early in the planning stages as possible, to ensure compliance .


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