June 22, 2022
US Supreme Court grants cert to hear FBAR penalty application case
Yesterday, the U.S. Supreme Court agreed to hear Bittner v. United States, a Fifth Circuit case on applying non-willful penalties for failure to report foreign financial accounts on FinCEN Form 114, otherwise known as an “FBAR” filing. Specifically, the Court will address whether the $10,000 penalty (as adjusted for inflation) imposed under 31 USC § 5321 for non-willful violations of the statute applies per annual filing (i.e., a maximum of $10,000 per year as adjusted for inflation), or per account that should have been reported.
In Bittner, the Fifth Circuit held that a separate violation occurred for each foreign account not timely reported on an FBAR, and imposed a penalty of $2.72 million over five years. Bittner argues the penalty should apply on a per-filing basis, which would reduce the penalty to $50,000, consistent with the Ninth Circuit’s decision in United States v. Boyd, 991 F. 3d 1077. In Boyd, the court held that the non-willful penalty applies on a per-filing basis, not on the number of foreign accounts.
The U.S. Supreme Court decision in this case will resolve the divergent positions held by the two appellate courts. The Court will not review the more serious penalty for willful failure to report (the greater of $100,000 as adjusted for inflation or 50% of the balance in the account at the time of the violation) or applicable FBAR criminal sanctions. Determining the proper application of the non-willful penalty will have far-reaching ramifications and should provide clarity on the split in the circuit courts.
Lauren Lovelace, Principal – International Tax and Transactions Services
Matthew Blum, Managing Director - International Tax and Transactions Services
Kunal Pawa, Senior Manager - International Tax and Transactions Services
Jonathan Jackel – Managing Director – Information Reporting & Withholding
Saul Tilmann – Senior Manager - Information Reporting & Withholding