Supreme Court Asked to Weigh in on FBAR Penalty Circuit Split: Fifth or Ninth? Boyd or Bittner? Per Form or Per Account? Inquiring Minds Want to Know!!!
By Josh O. Ungerman on March 14, 2022
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Josh O. Ungerman
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The Supreme Court passes on most of the cases it is invited to decide, but appellate court splits are often the key to a Supreme Court opinion. Following the 5th Circuit Court of Appeals holding in United States v. Bittner, there now exists a divide among the 5th Circuit and 9th Circuit in the determination of the penalty that can be levied by the IRS when a taxpayer non-willfully fails to report offshore accounts on an FBAR. Mr. Bittner has requested that the Supreme Court settle the circuit court dispute.
The Fifth Circuit, in Mr. Bittner’s case, upheld the IRS theory that a separate $10,000 violation for each offshore account non-willfully excluded from a timely filed FBAR. In other words: a non-willful FBAR penalty on a per-account, as opposed to a per-form, basis. In contrast, the Ninth Circuit, in United States v. Boyd, 991 F.3d 1077 (9th Cir. 2021), held that a non-willful FBAR violation constituted a single violation subject to a single $10,000 penalty “no matter the number of accounts.” In a recent interview with Tax Notes, I had the following to say about the two competing decisions:
“You’ve got two diametrically opposed positions between the Fifth Circuit and the Ninth Circuit,"
"It would be very helpful to the tax community — the government and private practice— to have a ruling by the Supreme Court on this issue.”
The circuit split is especially significant because there are still many educated practitioners who remain unfamiliar with the FBAR rules. When asked by Tax Notes about the impact of the circuit split, I said that:
“I can see a lot of people, especially with a non-willful penalty . . . that can and will get hit by this. If the Supreme Court puts down a decision that says it’s a per-form basis as opposed to
per account, I think it would be subjecting people to an appropriate level of penalty. There’s still a lot of people out there that don’t know about this requirement.”
Watch for a follow-up post after the response from the government due April 1, 2022. If you have any questions regarding this blog post or any other civil or criminal tax related matter, please feel free to contact Josh Ungerman at (214)749-2427 or jungerman@meadowscollier.com.
The Fifth Circuit, in Mr. Bittner’s case, upheld the IRS theory that a separate $10,000 violation for each offshore account non-willfully excluded from a timely filed FBAR. In other words: a non-willful FBAR penalty on a per-account, as opposed to a per-form, basis. In contrast, the Ninth Circuit, in United States v. Boyd, 991 F.3d 1077 (9th Cir. 2021), held that a non-willful FBAR violation constituted a single violation subject to a single $10,000 penalty “no matter the number of accounts.” In a recent interview with Tax Notes, I had the following to say about the two competing decisions:
“You’ve got two diametrically opposed positions between the Fifth Circuit and the Ninth Circuit,"
"It would be very helpful to the tax community — the government and private practice— to have a ruling by the Supreme Court on this issue.”
The circuit split is especially significant because there are still many educated practitioners who remain unfamiliar with the FBAR rules. When asked by Tax Notes about the impact of the circuit split, I said that:
“I can see a lot of people, especially with a non-willful penalty . . . that can and will get hit by this. If the Supreme Court puts down a decision that says it’s a per-form basis as opposed to
per account, I think it would be subjecting people to an appropriate level of penalty. There’s still a lot of people out there that don’t know about this requirement.”
Watch for a follow-up post after the response from the government due April 1, 2022. If you have any questions regarding this blog post or any other civil or criminal tax related matter, please feel free to contact Josh Ungerman at (214)749-2427 or jungerman@meadowscollier.com.
