June 28, 2022
US Supreme Court grants cert to hear FBAR penalty application case
On 21 June 2022, the United States (US) 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 US$10,000 penalty1 (as adjusted for inflation) imposed under 31 USC Section 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 US 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.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (United States), International Tax and Transaction Services
Ernst & Young LLP (United States), Information Reporting & Withholding