The US Supreme Court has agreed to hear the taxpayer’s appeal of the Fifth Circuit Court of Appeals decision in the case of Bittner v. United States.[1] The key issue is whether, in assessing penalties for failing to report interests in foreign accounts on an annual FBAR, the penalties apply on a per-account or per-reporting form basis, a matter which was decided differently in 2021 cases heard by the Fifth and Ninth Circuits.

The Court summarized the issue to be decided as follows:

Whether a “violation” under the Act is the failure to file an annual FBAR (no matter the number of foreign accounts), or whether there is a separate violation for each individual account that was not properly reported.[2]

The document granting certiorari provides the following information regarding the case and why the Supreme Court is taking up the matter:

This case presents a direct and acknowledged conflict regarding an important question of statutory construction under the Bank Secrecy Act, 31 U.S.C. 5311 et seq., which generally requires taxpayers to report their interests in foreign bank accounts.

Under the Act, Congress instructed the Treasury Secretary to “require a resident or citizen of the United States * * * to keep records, file reports, or keep records and file reports, when the * * * person makes a transaction or maintains a relation for any person with a foreign financial agency.” 31 U.S.C. 5314(a). The Secretary’s corresponding regulations require filing a single annual report (called an “FBAR”) for anyone with an aggregate balance over $10,000 in foreign accounts. 31 C.F.R. 1010.350(a), 1010.306(c). The Act authorizes a $10,000 maximum penalty for any non-willful violation of Section 5314. See 31 U.S.C. 5321(a)(5)(A)-(B).

In the decision below, the Fifth Circuit held that there is a separate violation (with its own $10,000 penalty) for each foreign account not timely reported on an annual FBAR; it thus authorized a penalty on “a per-account, not a per-form, basis.” In so holding, the Fifth Circuit expressly rejected a contrary decision of the Ninth Circuit, which held the failure to file an annual FBAR constitutes a single violation, “no matter the number of accounts.” This critical issue arises all the time, and the Act’s penalties for identically situated parties will now turn on whether the taxpayer is from California or Texas.[3]

The Ninth Circuit opinion referenced by the Supreme Court was for the case of United States v. Boyd.[4]

For the taxpayer whose case is before the Supreme Court, applying the penalty on a per account basis added up to a total penalty of $2.72 million, while if the Ninth Circuit’s per FBAR report basis had been followed the penalty would have amounted to $50,000.

No date has been given for oral arguments, but the Court just ended its current term. Its new term will begin in October.

[1] Supreme Court Grant of Cert. 21-1195 BITTNER V. UNITED STATES, June 21, 2022, https://www.supremecourt.gov/qp/21-01195qp.pdf (retrieved June 25, 2022), Bittner v. United States, CA5, Docket No. 20-40597, November 30, 2021, https://www.taxnotes.com/research/federal/court-documents/court-opinions-and-orders/fifth-circuit-holds-non-willful-fbar-penalties-apply-per-account/7cn4d?h=Bittner (retrieved June 25, 2022)

[2] Supreme Court Grant of Cert. 21-1195 BITTNER V. UNITED STATES, June 21, 2022

[3] Supreme Court Grant of Cert. 21-1195 BITTNER V. UNITED STATES, June 21, 2022

[4] United States v. Boyd, CA9, Docket No. 19-55585, March 24, 2021, https://cdn.ca9.uscourts.gov/datastore/opinions/2021/03/24/19-55585.pdf (retrieved November 30, 2021)