Tag Archives: Shick

Part 5: Mr. FBAR’s Civil Penalty – 5321(a)(5): Bittner – Maximizing The Penalty By Imposing It On Each Account

This Is Post 5 in a series of posts describing the statutory and regulatory history of Mr. FBAR.

These posts are organized on the page “The Little Red FBAR Book“.*

As previous posts have described, the threshold question in an FBAR civil civil penalty case governed by 5321(a)(5), is whether the violation is “willful” or “non-willful”. If “non-willful” the penalty is limited to $10,000 (appropriately adjusted for inflation). If Willful” a much higher penalty regime – the greater of $100,000 USD or 50 percent of the account balance – applies. Given the potential for FBAR penalties to be a significant “fundraiser”, the government has clear incentives to argue for “willfulness”. In Schik we are reminded that “willfulness” is a question of fact which the government must prove by a “preponderance of the evidence standard”. In Toth we saw the government greatly assisted by a judicial sanction that deemed Ms. Toth to be willful. The most egregious aspect of Toth was that the government was not even required to meet its factual burden of proof. In Bittner the government was stuck with a factual finding of non-willfulness.

Q. How can the government maximize FBAR penalties in the context of non-willfulness?

A. By imposing the FBAR penalty on each unreported account rather than on the failure to file the FBAR itself.

Such is the context of Bitter where the government:

First, imposed a $10,000 penalty on each individual account; and

Second, repeated the process for five years resulting in approximately 2.7 million in FBAR penalties.

Interestingly, the effect of this approach was that the Government could assert FBAR penalties that exceeded the maximum penalties authorized under the 5322 criminal penalty provision. Why would the government take this approach? The answer comes from the last paragraph of the Solicitor General’s brief filed in the Bittner petition for certiorari.

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