February 28, 2023
Decided February 28, 2023
Bittner v. United States, No. 21-1195
Today, in a 5–4 opinion, the Supreme Court held that the Bank Secrecy Act imposes a single penalty for each nonwillful failure to file an annual form disclosing foreign financial accounts, regardless of the number of accounts that were not disclosed.
Background: The Bank Secrecy Act requires U.S. residents and citizens to report all of their foreign financial accounts each year in a report known as an FBAR (for Report of Foreign Bank and Financial Reports). The Act also imposes statutory penalties on those who do not file an accurate, timely report. Nonwillful violations carry a maximum penalty of $10,000, and willful violations trigger a maximum penalty of $100,000 or 50% of the balance of the account at issue.
Alexandru Bittner did not timely file timely FBARs to report his more than 50 foreign bank accounts over a five-year period. The IRS imposed a $10,000 penalty for 272 separate nonwillful violations—in other words, a separate penalty for each account that was not timely reported each year—for a total statutory penalty of $2.72 million. Bittner fought the assessment on the theory that he committed only five violations of the Act—one for each year he did not file a timely FBAR. The Fifth Circuit, departing from a previous decision of the Ninth Circuit, disagreed, holding that the Bank Secrecy Act imposes a separate penalty for each improperly disclosed foreign account.
Issue: Whether a person who nonwillfully fails to report multiple foreign financial accounts faces a single annual penalty for not filing a complete FBAR or separate penalties for each account that was not properly reported.
The Bank Secrecy Act authorizes only a single $10,000 penalty for the nonwillful failure to file an annual FBAR, even if multiple foreign financial accounts are not reported.
“Best read, the [Bank Secrecy Act] treats the failure to file a legally compliant report as one violation carrying a maximum penalty of $10,000, not a cascade of such penalties calculated on a per-account basis.”
Justice Gorsuch, writing for the Court
What It Means:
The Court’s opinion is available here.
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