The relative strength of the British Pound against the US Dollar recently has led a large number of Brits to liquidate their assets in Britain and relocate to the balmy climes of such US states as Florida and California. Some have chosen to make the move as investors via the E2 Treaty Investor visa program. Others have made the move by establishing US subsidiaries of their UK companies and transferring themselves to the US as L-1A multinational executives.
Most of these individuals will make the required investments or acquisitions completely ignorant of the US law that required them to report the transaction to the U.S. Department of Commerce within 45 days. The civil penalty for failing to report such investment or acquisition can include a fine ranging from $2,500 to 25,000.00. The following article will give the reader a brief overview of the initial reporting requirements.
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 primary US federal statutes that governs the reporting of investments made in the United States news-utility by foreign investors. Under IITSSA, and its related regulations, a mandatory report is required of a US business enterprise when a foreign person acquires (directly or indirectly) through an existing US affiliate, a 10%+ voting interest in that enterprise, including an enterprise that results from the direct or indirect acquisition by a foreign person of a business segment or operating unit of an existing US business enterprise that is then organized as a separate legal entity, or the existing US affiliate of a foreign person when it acquires a US business enterprise or operating unit that the existing US affiliate merges into its own operations.
The mandatory report must be filed with the US Department of Commerce’s Bureau of Economic Analysis (the “BEA”) no later than 45 days after the completion of such a transaction. Failure to file the mandatory report exposes one to a civil penalty of not less than $2,500.00, and not more than $25,000.00. Whoever willfully fails to report will be fined no more than $10,000.00. may be imprisoned, or both. Any officer, director, employee, or agent of any corporation who knowingly participates in such a violation, upon conviction, may be punished by a similar fine, imprisonment, or both. The IITSSA provides that the reported information is confidential, and may be used only for analytical or statistical purposes.
There is, however, an exemption for which an exemption claim must be filed if an established or acquired US business enterprise, as consolidated, has total assets of $3 million or less and does not own 200 acres or more of U.S. land, or the total cost of an acquisition by an existing US affiliate of a US business enterprise or business segment or operating unit that it merges into its own operations is $3 million or less and does not involve purchase of 200 acres or more of U.S. land. Additionally, no report need be filed if the transaction involves residential real estate held exclusively for personal use and not for profit making purposes.
A report may also be required of a US person who assists or intervenes in the sale to, or purchase by, a foreign person, of a 10 percent or more voting interest in a US business enterprise, including real estate, or who enters into a joint venture with a foreign person to create a US business enterprise. A US person must so report only if the US person knows of or has reason to believe that there is such foreign involvement