On February 24, 2011, the Treasury Department issued final regulations regarding the Report of Foreign Bank and Financial Accounts (“FBAR”). The Regulations are effective March 28, 2011 and apply to 2010 FBARs due June 30, 2011, as well as any FBARs from prior years that were deferred under prior IRS guidance.
The Regulations provide additional clarity regarding which U.S. Persons are deemed to have signature authority over foreign financial accounts, and which types of accounts are considered foreign financial accounts for purposes of FBAR. Private investment funds (e.g. foreign hedge funds and private equity funds) are not specifically addressed and guidance on their status as foreign financial accounts remains under consideration. For the time being, interests in such entities are not treated as foreign financial accounts and do not require FBARs. Foreign mutual funds, which are defined in the Regulations as those pooled investment funds which issue shares to the general public, are considered foreign financial accounts and must be reported. We continue to believe that Commonfund’s offshore funds do not fall under the definition of mutual funds as they are not available to the general public.
Given that the status of these types of funds is still under consideration and subject to change in the future, we continue to recommend that our clients consult with their tax advisors regarding their investments in Commonfund offshore programs.