The world of US tax and disclosure compliance is filled with a mess of acronyms and initialisms; here is a short glossary to help find your way.
1. FBAR (Foreign Bank Account Report)
The FBAR, also known as FinCEN Form 114, is a report filed with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury to disclose foreign financial accounts.
2. FinCEN (Financial Crimes Enforcement Network)
The Financial Crimes Enforcement Network, responsible for collecting and maintaining information on financial transactions to combat money laundering and other financial crimes. FinCEN is a division of the US Department of Treasury but is separate from the IRS.
3. IRS (Internal Revenue Service)
Fun fact, IRS does not stand for “Incredibly Rapid Service”. As you are likely aware, it stands for the Internal Revenue Service; the federal revenue agency of the United States and a division of the US Department of Treasury.
4. CTA (Corporate Transparency Act)
Corporate Transparency Act; a new US law requiring the disclosure of beneficial owners of certain US and foreign entities.
5. UBO (Ultimate Beneficial Owner)
Ultimate Beneficial Owner, an industry term referring to the individual who, based on the applicable paradigm, is determined to own an asset or entity. Generally, UBO status is determined on either who derives the economic benefits of the property, or who controls the property, or both factors.
Different jurisdictions have their own criteria for determining the UBO. The CTA does not use the term UBO, therefore we generally will use the capitalized term Beneficial Owner when referring to a UBO in the context of the CTA.
6. USP (US Person)
A US Person, but this doesn’t have to be an individual; it may refer to an individual, corporation, partnership, or other entity subject to U.S. jurisdiction and required to comply with U.S. tax and reporting requirements.
7. IRC (Internal Revenue Code)
The Internal Revenue Code is the portion of US federal law that covers most US federal tax issues. You may see specific portions referenced as IRC Sec. 671 or similar.
8. EIN/TIN/SSN
These three all refer to government issued identification numbers used by the IRS. They stand for:
Employer Identification Number
Taxpayer Identification Number (sometimes referred to as Individual Taxpayer Identification Number or ITIN)
Social Security Number
The SSN is issued by the Social Security Administration and is generally used only by US citizens or residents. The EIN and TIN are issued by the IRS and are often used by foreign taxpayers (as well as domestic taxpayers).
9. CFC (Controlled Foreign Corporation)
In the US context, a non-US corporate entity determined to be owned or controlled by a US Person; generally to an extent greater than 50%, but nuances may apply to specific situations.
10. PFIC (Passive Foreign Investment Corporation)
A foreign corporation that generates passive income, such as interest, dividends, or capital gains. Due to the way this is defined, many foreign mutual funds or similar are considered PFICs as well. If a US Person holds an interest in a PFIC they are generally subject to punitive reporting regimes.
11. GILTI (Global Intangible Low-Taxed Income)
A US tax provision that seeks to accelerate certain foreign income to US taxpayers.
12. FFI(Foreign Financial Institution)
A non-US entity, such as a foreign bank, that may have reporting requirements under FATCA (and applicable local law).
13. TIEAS (Tax Information Exchange Agreements)
An agreement between two countries to share tax information; to enhance tax enforcement and compliance. A full list of US TIEAS may be found here: Tax Information Exchange Agreements (TIEAs) | U.S. Department of the Treasury.
14. Foreign Account Tax Compliance Act (FATCA)
A U.S. law requiring foreign financial institutions to report account information of U.S. account holders to the IRS, enhancing tax compliance.
15. IGA (Intergovernmental Agreement)
An agreement between the US and foreign jurisdiction used to enforce FATCA and obtain information on US Persons foreign bank accounts.