Page 2 - Streamlined Disclosure in U.S. v. Brian Nelson Booker: A Former CPA Sets a Dubious Precedent

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the prior year are required to file with the income was due to nonwillful conduct. The who waited to come forward to disclose
Commissioner of Internal Revenue a certification of nonwillful conduct had to their foreign accounts. As will be explained
Report of Foreign Bank and Financial include a narrative—signed under penalty below, only a narrow range of taxpayers
Accounts (FBAR). An FBAR identifies, of perjury—explaining the origin and back- meets the nonwillful requirements of the
among other things, the name of the finan- ground of the foreign account, including SDOP, but many willful taxpayers try to
cial institution at which the account was favorable and unfavorable facts, the source make the case for eligibility. That is why
held, the account number, and the maxi- of the funds, and the taxpayer’s contact both taxpayers and tax advisors face par-
mum value of the account during the cal- with the account at issue. The certification ticular scrutiny in the context of the SDOP.
endar year. must also set forth the taxpayer’s basis for It is no secret that the DOJ has invested
Willful failure to comply with these for- asserting that the failure to report was non- tremendous resources into prosecuting tax-
eign account reporting requirements can willful—that is, it was due to negligence, payers who failed to take advantage of the
result in civil penalties of the greater of inadvertence, mistake, or conduct that was many opportunities to come forward
$100,000 or 50% of the amount in the the result of a good-faith misunderstanding through one of the OVDPs. Since 2008,
account for each violation; each year of of the requirements of the law. the DOJ has criminally charged more than
noncompliance also constitutes a separate In exchange for filing three years of 130 accountholders and 40 facilitators,
violation. Pursuant to the Federal Civil including tax advisors (Testimony of
Penalties Inflation Adjustment Act Acting Assistant Attorney General David
Improvements Act of 2015, the willful It is no secret that the A. Hubbert of the DOJ Tax Division
FBAR penalties were increased to the Before the House Judiciary Committee
greater of $129,210 or 50% of the amount DOJ has invested tremen- Subcommittee on Regulatory Reform,
in the account for penalties assessed after Commercial & Antitrust Law, at a Hearing
January 15, 2017. Potential criminal penal- dous resources into pros- on Oversight of the Tax Division, June 8,
ties for willful failure to comply include up 2017, http://bit.ly/37qZuBI). Beginning in
to five years in prison and a fine of up to ecuting taxpayers who 2016, the DOJ made it clear that those who
$250,000 [18 USC 5322(a)]. participated in the SDOP should be con-
failed to take advantage cerned if their disclosures were not truthful:
Voluntary Disclosure and Streamlined of the many opportunities While we certainly encourage taxpay-
Domestic Disclosure ers to come into compliance, Tax
In 2007, after a whistleblower revealed to come forward through Division prosecutors are reviewing cer-
that UBS in Switzerland was assisting U.S. tain streamlined filings and will inves-
taxpayers in evading U.S. taxes through one of the OVDPs. tigate and prosecute taxpayers who
undisclosed foreign bank accounts, the IRS willfully submit false statements in an
and DOJ undertook a major effort to scru- effort to obstruct and impede the IRS
tinize the foreign account reporting of U.S. amended returns reporting foreign income and evade the payment of tax due.
taxpayers. In 2009, the IRS began to use and six years of FBARs, a taxpayer is (Principal Deputy Assistant Attorney
a carrot-and-stick approach to foreign required to pay a significantly reduced civil General Caroline D. Ciraolo, Keynote
account reporting by announcing the first penalty equal to 5% of the highest year- Address at the American Bar
of a series of formal Offshore Voluntary end balance of accounts and assets that Association’s 27th Annual Philadelphia
Disclosure Programs (OVDP), which gave should have been reported on either the Tax Conference, November 2, 2016,
taxpayers the ability to disclose their inter- FBAR or IRS Form 8938, Specified http://bit.ly/2qoSIZy).
ests in foreign bank accounts without the Foreign Financial Assets. This 5% penalty With the filing of the Booker indictment,
risk of criminal prosecution. In announcing for those who qualify under the SDOP is the DOJ’s threats have become a reality.
these OVDPs, the IRS stated clearly that significantly less than that offered in every
those who did not come forward promptly permutation of the OVDP, which began at What Did Booker Do?
to disclose faced the very real possibility 20% in 2009 and is now set at the default Because Booker has absented himself
of criminal prosecution. “willful FBAR penalty,” which is the from the United States and is considered
In June 2012, the IRS announced the greater of $129,210 or 50% of the amount a fugitive, the only facts available about
SDOP, which opened the door to signifi- in the account. [See IRS Interim Guidance the case are those alleged by the govern-
cantly lower potential penalties for taxpay- Memo, Updated Voluntary Disclosure ment in the indictment. According to the
ers who were able to truthfully certify that Practice (November 20, 2018).] As a result, indictment, Booker is a U.S. citizen who
their failure to report foreign accounts or the SDOP is very attractive to taxpayers was registered as a CPA with the Texas

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