Page 5 - Penalties.The Government’s New Stance That the Non-Willful Civil FBAR Penalty Applies to.JTPP_22-02_Rule

different foreign bank. The government argued in Boyd as a punishment for noncompliance with a regulatory
that: “[A]nything less than reporting on a per-account mandate is penal. 28
basis would be wholly inadequate to disclose the par-
ticipants in a given relationship, the legal capacity in The U.S. Tax Court has also held that, under the rule of
which the U.S. person is acting with respect to the lenity, “[a]mbiguity in a statute defining a crime or impos-
account, or the real parties in interest.” But reporting ing a penalty should be resolved in the defendant’s favor.”
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on a per-account basis is exactly what an FBAR is for. The court explained that, while the rule of lenity is not
Separate accounts are reported as owned individually, universally applied to tax laws, “since [a provision of the
jointly, or as accounts over which the taxpayer only code] imposes an addition to tax (indeed, the addition
has signatory authority. The government’s emphasis to tax is described in the heading … as an [i]ncrease in
on reporting each account has absolutely nothing to penalty), any ambiguity in its application is resolved by
do with imposing a non-willful penalty per account. the rule of lenity.” 29
Moreover, if a person failed to report one or two of In sum, the rule of lenity, when applied to the gov-
three foreign accounts held in different capacities, ernment’s current arguments about “per account” civil
or only reported one of two foreign accounts held at monetary penalties for non-willful failures to file timely
different banks, it is highly unlikely that that person FBARs, requires that the issue be resolved in taxpayers’
would be held to be non-willful. favor. The baseline non-willful penalty provision, which
Finally, although the non-willful civil FBAR pen- provides for a civil penalty for non-willful failure to file
alty provision is unambiguous in providing for a single a timely FBAR, says nothing at all about a “per account”
maximum $10,000 penalty for the failure to timely file a penalty; instead it provides that a single non-willful FBAR
single accurate annual FBAR, regardless of the number of penalty for one year should never exceed $10,000.00.
accounts that are reported on that FBAR, assuming, for Even the Boyd court initially agreed “that a rule of lenity
the sake of argument, that this provision were ambiguous, should apply here,” and that the rule “dictates that the
under the rule of lenity, the District Court’s decision in court should choose the more lenient of two reasonable
Boyd should be reversed, and the government’s position interpretations.” But, despite its belief that the FBAR
rejected. penalty provision is “somewhat unclear,” the court inex-
According to 2010 Supreme Court precedent, “the rule plicably refused to apply the rule of lenity. If it had
30
of lenity … applies if, after considering text, structure, done so, it would surely have held that the non-willful
history, and purpose, there remains a grievous ambiguity civil FBAR penalty applies per untimely FBAR and not
or uncertainty in the statute, such that the Court must per each account.
simply guess as to what Congress intended.” According
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to the Ninth Circuit, while the rule of lenity arose in con- C. Conclusion
nection with criminal statutes, it has “not been limited to
criminal statutes, particularly when the civil sanctions in It is still up in the air whether the Ninth Circuit will
question are punitive in character.” In a 2015 concur- reject the government’s arguments that the non-willful
27
rence, Justice Thomas confirmed that the rule of lenity maximum $10,000 civil FBAR penalty can be imposed
applies to civil fines: per account reported on an untimely FBAR, rather than
per untimely annual FBAR itself. If the court fully analy-
By “penal,” I mean laws “authoriz[ing] criminal ses the penalty statute, related authorities, and the huge
punishment” as well as those “authorizing fines … inequities that will result from the government’s position,
that are enforced through civil rather than criminal it is likely to hold that the government’s arguments are
process.” … [A] law imposing a monetary exaction unsupported by statute or regulation.

endnoteS
1 Code sec. 5321(a)(5)(B)(i). was filed with the iRs on June 30 for the previ- of tax Counsel as Amicus Curiae in support
2 FinCeN Form 114, to be filed with the Financial ous year. the current and prior FBaRs are very of Defendant-appellant,” filed November 15,
Crimes enforcement Network by april 15 after similar. 2019.
the calendar year. Until 2013 (and most cases 3 Docket No. 19-55585. Boyd’s Reply Brief is due 4 Case No. 4:19-cv-001415. the court held a tele-
discussed herein involve FBaRs filed before June 29, 2010. the author of this column was phone hearing on June 4, 2020, but as of this
2013), the FBaR was Form t.D. F 90-22.1, which co-author of the “Brief of american College writing has not yet rendered a decision.

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