I am of two minds in posting these. On the one hand, I don’t want to contribute to “fear mongering”. On the other hand, the discussion in these two posts is of some interest. In the interests of NOT getting upset, I point out the facts in this case do NOT deal with Americans abroad. The judge interprets the FBAR rules to mean (see page 2 of the decision) that any person RESIDING IN THE UNITED STATES must file an FBAR. The decision also confirms the plain wording of the FBAR statute which says that no FBAR penalty will be imposed if there is “reasonable cause” and the balance in the offending account was properly reported. We are still left with the “fact specific interpretation” of what constitutes “reasonable cause”.
What I find interesting is that this is yet one more “octogenarian” who is having “Adventures with FBAR“. It’s as though by the time a Homelander reaches 80, he will have to deal with the state of his FBARs.
The following two tweets link to articles that provide “CondorSpeak” (perhaps a “sing along” to “Form People“) on issues surrounding our friend Mr. FBAR.
Are you frightened yet?
April 28, 2015 – 1 of 2
Court Approves FBAR Penalty | TaxConnections Worldwide Tax Blog http://t.co/w9He6IuvTW – 1 of 2
— U.S. Citizen Abroad (@USCitizenAbroad) April 29, 2015
The opinion is interesting for many reasons, including its extensive discussion of the Administrative Procedure Act and the constitutional challenges Moore raised in opposition to the IRS’s assessing FBAR penalties. In addition, the opinion discusses the merits of Moore’s reasonable cause defense, a defense with considerable law in the context of civil tax penalties but not much law in the world of FBAR penalties.
April 29, 2015 – 2 of 2
Court Approves FBAR Penalty and Addresses Previously Unknown Issues! | TaxConnections Worldwide Tax Blog http://t.co/odyz4IP1bR
— U.S. Citizen Abroad (@USCitizenAbroad) April 29, 2015
We had previously posted Court Approves FBAR Penalty and Raises Important Administrative and Constitutional Law Issues where we discussed that on April 1, 2015, in response to a summary judgment motion, in Moore v. U.S., (DC WA 04/01/2015) 115 AFTR 2d ¶2015-591 the district court for the western district of Washington reviewed the procedures and standards that apply to penalties for non-willful failure to file the FBAR.
The opinion was interesting for many reasons, including its extensive discussion of the Administrative Procedure Act and the constitutional challenges Moore raised in opposition to the IRS’s assessing FBAR penalties. Rubin on Tax details the decision and how it addresses some of the unknown and uncertain penalty issues relating to failure to file FBARs. These issues include:
We are still left with the “fact specific interpretation” of what constitutes “reasonable cause”. …
I disagree somewhat with such a claim. What is deemed wilful has very nicely been documented in released FOIA docs:
Yup, that’s the IRS position. The question is (at least I hope) how will the courts interpret this.
What implications might his have for the Bopp lawsuit, as he’s asserting that the penalties imposed for willful violations of the FBAR reporting requirement could be challenged under the Excessive Fines Clause of the Eighth Amendment.
Re: Bopp lawsuit. Pardon my ignorance, but where does one find information about what is going on with Mr. Bopp’s efforts? When I look at fatcalegalaction.com I see calls to contribute, but for what? There is no discussion of intentions or ongoing actions.
From my perspective, given that the $10k non-willful is the standard IRS penalty, this particular case is not on the same level as the horror stories of (particularly) OVDP 2009. I am sure there will be more than enough to give the 8th amendment a real challenge. With thanks to Shulman and his vicious and threatening record.
I suspect, though, that someone who fails to report $300,000 held outside his country of residence and gets a $40,000 fine doesn’t reside doesn’t really illustrate the major problems of the FBAR penalties. If Moore still lived in the Bahamas and had $30,000 in his account instead, a standard $40,000 penalty would seem a lot less justifiable.
I have also noticed on the DA facebook page many people are taking DA to task about its pathetic SFC submission and its stance on CBT. There more people who go on there and hold DA accountable, the better. Go to their facebook page and make your thoughts known. I am doing so after I finish writing this.
There’s been commentary here about the Bopp lawsuit. Try searching for it in the Brock search bar.
I didn’t do of very good job saying what I meant. I didn’t mean that this case was particularly onerous in terms of the penalty. I meant that with regard to any violations of 8th amendment, the older stories from OVDP 2009 in particular, would provide much to demonstrate the fact that penalties have been assessd that clearly do violate. Hope that makes sense.
By contrast in Canada:
Canada: Budget 2015: Penalties For Tax Reporting Failures Modified
…”Subsection 163(1) of the Income Tax Act (Canada) (the “Tax Act”) currently imposes an onerous penalty on taxpayers that repeatedly fail to report amounts in their tax returns that are required to be included in their income. While this penalty provision is designed to provide a strong incentive for taxpayers to ensure that their tax filings are accurate and complete, the scope and consequences of contravening subsection 163(1) often catch taxpayers by surprise and have been the subject of much criticism.”…
…”A survey of the historical case law reveals that taxpayers have been assessed a 163(1) Penalty even in circumstances where:
sufficient income tax was withheld from the taxpayer at source and no additional taxes were owing by the taxpayer;
the taxpayer did not receive the appropriate tax slip (e.g., a T4, T5, T4A) before filing his/her tax return;
the taxpayer relied on an accountant to prepare her returns; or
the amount of the penalty was grossly disproportionate to the amount of unpaid tax.”
…”The Government has indicated that the proposed amendments to subsection 163(1) are expected to result in a reduction of Government revenues of approximately $45 million over the coming five years. The Government should be recognized for paying heed to the concerns expressed by both taxpayers and the Courts, and for taking positive steps to make the provisions of the Tax Act more equitable and proportional.”…
Re above: What’s so great about revenue neutrality when Canada’s willing to overlook it in the spirit of fairness?
…”US citizens residing outside the US are subject to the same penalty structure as US citizens residing in the US”.
Sort of on topic: draft paper arguing that the statutory willful FBAR fines may violate the Excessive Fines clause because FBAR has turned primarily into a tax enforcement thing rather than being used for any of the other stuff the Financial “Crimes” Enforcement Network covers (e.g. money laundering, drug trafficking, etc.), and so the penalties should be proportional to the tax owed rather than the account balance. (“The penalties, as currently structured, penalize the reporting offense significantly more harshly that the offense for which the reporting rules were designed to deter.”)
Mainly I find it worth mentioning not for the argument itself but who it’s coming from, since it seems the author is one of those guys who has otherwise swallowed whole the fables about trillions of dollars hidden offshore and how the only reason anyone would have an account outside the US is to hide income or for other nefarious purposes.