A Passive NFFE is any entity that does not classify as: (i) A financial institution; and (ii) An Active NFFE. To determine whether a NFFE is active or passive, a complex income statement and balance sheet analysis must be performed. see the section on Passive Income and the section What is meant by a passive entity (Passive NFFE) under FATCA?) with shareholders who are U. Step Six: If the entity does not qualify as a Financial Institution, Exempt Beneficial Owner, or Excepted NFFE, it must be classified as a Passive NFFE. institution, an excepted NFFE or a passive NFFE.