Requirements for Trust Transaction Declaration by Foreign Investors

International estate planners and foreign trust owners are subject to federal Financial Industry Regulatory Authority (“FINRA”) rules guiding foreign direct investment (“FDI”) deals. International investment trusts participating in FDI agreements domestically, are overseen by the Committee on Foreign Investment in the United States (“CFIUS”). CFIUS regulation requires alternative trading system (“ATS”) transaction types are in conformance with U.S. federal law. Foreign investors are responsible for filing mandatory “declarations” with description of transactions prior to close or transfer to an estate or trust; including payment of a filing fee of up to $300,000 per transaction.

FIRRMA and CFIUS

The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) put into force August 13, 2018, expands the jurisdictional powers of CFIUS. The Committee is responsible for oversight of all FDI transactions from abroad, and adheres to FIRRMA rules that ATS must be compliant with Securities and Exchange Commission (“SEC”) NMS Regulation, and Regulation SHO close out standards. The Act also stipulates ATS identify trading risks occurring for those transactions to be compliant. FIRRMA is intended to impose global compliance across investment transaction authorities, including CFIUS.

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Domicile and Situs Taxation Rules

Both the federal Internal Revenue Service (“IRS”) and SEC recognize ATS investment trades as situs (site) assets. The IRS defines such assets as “US-situs” for purposes of taxation. IRS situs guidelines apply to brokerage accounts, business Investment funds, life Insurance and annuities, money market funds, privately offered bond debt instruments, stocks issued by a U.S. corporation (including certificates held abroad), qualified retirement plans with U.S. employer sponsors, real estate, and tangible property.

Non-citizen investors subject to CFIUS oversight of financial and property assets are also defined by rules of domicile within the IRS code. The IRC provides rules to U.S. income tax filing conformance with bi-lateral tax treaties between a foreign country of domicile, residence, and/or citizenship and the United States. Estate and trust investors can review investor tax credit incentives by tier of investment published by the IRS. The IRS provides guidelines for non-citizen estate and trust investment income reporting (IRC 4.25.4.1 (08-05-2016) Estate Tax Return Filing Requirements for Estates with International Issues). Transfer tax, domestic and foreign credits, and other relevant investment related tax issues defined by the international tax treaties may apply. Non-U.S. situs assets are exempt from gift-tax.

ATS Declaration and Trusts

FINRA publication of Regulatory Notice 18-25 outlines guidelines for implementation and evaluation of ATS supervised transaction obligations. An estate planner, financial advisor, or attorney at law specializing in estate and trust preparation can advise a trust client about FIRRMA regulation and CFIUS rules applying to FDI transactions declared by foreign investor agreements, also described as “trusts.” Like foreign trust owners and international investors, planned giving specialists working with nonprofit charitable giving strategies, benefit from knowledge about the filing of mandatory “declarations” connected to a trust.

Planned giving specialists like foreign trust owners and international investors, benefit from knowledge about the filing of mandatory “declarations” connected to an investment trust.

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