Thursday, November 3, 2022
Todd: Bitner And The FBAR’s Muddy Morass—Shining A Light With Interpretive Tools
Following up on this morning's post, WSJ: The IRS And The 8th Amendment: Timothy M. Todd (Liberty), The FBAR’s Muddy Morass: Shining a Light With Interpretive Tools, 177 Tax Notes Fed. 179 (Oct. 10, 2022):
In this report, Todd tackles the question of whether foreign bank account report penalties should apply per account or per form through unit-of-prosecution analysis and a survey of similar misstatement regimes.
The Supreme Court has granted certiorari to resolve a circuit split over the proper interpretation of the Bank Secrecy Act’s penalty regime for foreign bank account report violations. The question presented is “whether a ‘violation’ under the Act is the failure to file an annual FBAR (no matter the number of foreign accounts), or whether there is a separate violation for each individual account that was not properly reported.” In other words, does an FBAR violation result from each failure to report a particular foreign bank account, or does a violation result from the singular failure to file an FBAR for the year, regardless of the accounts at issue?
As this report highlights, the statutory and regulatory language is far from clear. The courts of appeal have taken two competing approaches to this issue. The first view—the per-form approach—was adopted by the Ninth Circuit in Boyd The second view—the per-account approach—was adopted by the Fifth Circuit in Bittner, the case now before the Supreme Court. This report advances the discussion by using adjunctive interpretive tools that generally have not been used when analyzing this FBAR issue—namely, borrowing the unit-of-prosecution analysis from criminal law and surveying other false-statement regimes. Based on those insights, this report concludes that the per-form approach is the superior interpretive choice, given the current language. Moreover, as discussed, the per-form approach can also harmonize the term “violation” across the civil penalty regime and simultaneously reduce constitutional concerns when that same definition is applied to the criminal FBAR penalties.