Alexandru Bittner v. US, No. 21-1195 (2023)
This post is part of our series on recent important tax cases that may be of interest to accounting, tax, and finance professionals. For more like this, see our Federal Tax Update and California Federal Tax Update, which offer a comprehensive analysis of the year’s most pivotal tax developments.
IRS Can Impose Only One Non-Willful Penalty for Late FBAR Covering Multiple Foreign Accounts (Alexandru Bittner v. US, No. 21-1195 (2023))
The U.S. Supreme Court in a 5-4 decision has held that non-willful Foreign Bank Account Report (FBAR) penalties apply per report, not account. The decision is being hailed as a surprising and significant win for non-willful FBAR non-filers.
200 Accounts Walk Into an FBAR. The Court released its opinion in Bittner v United States on Feb. 28, 2023. Justice Neil M. Gorsuch, authoring the opinion, agreed with Mr. Bittner’s reading of the law in that the Bank Secrecy Act’s $10,000 maximum penalty for the non-willful failure to file a timely report accrues on a per-report, not per-account, basis. “Best read, the BSA treats the failure to file a legally compliant report as one violation carrying a maximum penalty of $10,000, not a cascade of such penalties calculated on a per-account basis,” Justice Neil Gorsuch wrote.
So, this would mean Bittner’s tab is $50,000 for five years of missing reports instead of the IRS’s original penalty assessment of over $2.7 million based on more than 200 accounts. FBAR non-filers are sure to cheer SCOTUS for this decision.
Also see.
U.S. v. Paul Manafort Jr. (No. 9:22-cv-80660, CA-11 (Feb. 22, 2023), where former Donald Trump campaign manager agreed to $3.15 million in FBAR penalties.
U.S. v. Isac Schwarzbaum, CA-11, 2022-1 USTC ¶50,107 (Jan. 25, 2022), where the Eleventh Circuit Court of Appeals found that the District Court had properly applied the legal standard in analyzing whether Schwarzbaum willfully violated the FBAR reporting requirements. “Willful conduct in the FBAR context includes knowing and reckless conduct. Reckless conduct is action that objectively entails a high risk of harm, which is the standard the district court applied.
George Harrington v. Comm., TCM 2021-195, where the taxpayer’s failure to report $791,661 of investment income from foreign accounts was fraud. The taxpayer filed FBARs reporting accounts in New Zealand but failed to report accounts in the Cayman Islands, Switzerland, or Liechtenstein.