Tuesday, March 11, 2014

Outstanding Presentation on FBAR Assessment and Collection (3/11/14)

Caroline Ciraolo, a major player in tax controversy generally and in OVDI/P specifically, has prepared a great presentation titled Assessment and Collections of the FBAR Penalty.  Caroline's bio is here.  The presentation is here.  Although the presentation is dated April 10, 2013, Caroline advises that the materials presented are still current.  Let me just say that Caroline drills down and asks and answers the questions most readers might have thought about with regard to FBAR assessment and collection.

Some topics she deals with are:

  • Administrative Offsets and Suits to Collect FBAR Penalties, Including Statutes of Limitations
  • Interest on Unpaid FBAR Penalties
  • Taxpayer Lawsuits to Challenge the FBAR Penalty Under the Tucker Act.
  • The FBAR Penalty in Bankruptcy

One particular matter that I found of current interest is a quick judicial remedy for a taxpayer suffering an FBAR willful penalty assessment.  The taxpayer may bring immediately a partial payment Tucker Act suit, not hampered by Flora's full payment rule.  For example, say the FBAR willful penalty is $1,000,000.  The taxpayer might pay, say, $100 and bring suit immediately (subject to any administrative claim that might have to be filed, which I have not researched yet).  That does not mean that the Government will stop collection measures, but collection measures may be limited, so the Government would likely then counterclaim for the balance (assuming that the two year statute of limitations for FBAR collection suits is still open, which would be the case if the taxpayer brings an immediate suit).

Even better, the taxpayer suffering an FBAR assessment can bring the suit in district court.  I have not traced out definitively whether the taxpayer is entitled to a jury, but the USAM Civil Resource Manual Title 4, 201, Jury Trials in Civil Cases, here, seems to indicate that a jury trial may be available.

Of course, one forum to litigate the FBAR assessment under the Tucker Act is the Court of Federal Claims where a jury trial is not available.  So, in choosing the forum, the taxpayer and his counsel will have to consider carefully the pros and cons of a jury trial.  In the case I am currently considering this option for a jury trial in the local district court is the way to go.  If we draw that assessment after Appeals Office review, we will be in the district court with a jury demand in less than a week (subject to any required administrative request which, under the tax analog, would be a formality because of Appeals previous consideration).


  1. Taxpayer Lawsuits to Challenge the FBAR Penalty Under the Tucker Act.......

    Now Jack that would be an interesting post on its own with a lot of added value
    for readers here !

    Interesting that you prefer a jury trial...obviously I do not know the details and
    it is a judgment call in the final analysis..............
    costs (a judge trial is likely to be less costly than jury trials), no hung jury (although some may like the possibility), etc.)
    Judges acquit more often than juries. Some say a bench trial only makes sense when a jury could be swayed by emotion for the victim, overwhelmed by technical evidence or confused by complicated legal instructions.
    If you have a case where you know the law and the facts are on your side but you have complicated issues and you don't know if it's going to get through to the jury clearly, you might want to consider a judge.
    In a bench trial, a judge acts as the sole finder of the facts, removing the possibility of disagreements encountered by a 12-person jury...... an attorney looks at whether a judge is "pro-defense or pro-government".

  2. Jack,

    I wanted to bring to your attention to an excellent article prepared by California tax lawyer Robert Horwitz on the topic. It is published in the California Journal of tax litigation. Robert is a former attorney from the DOJ tax division, years ago and a very good technical lawyer. The citation to the article and where it can be found is set out below, along with a couple excerpts from his article. It is in the member section for California tax lawyers.


    Litigating the FBAR Penalty in District Court and the Court of Federal Claims.

    Robert Horwitz24

    As a result of the IRS's campaign against taxpayers who hide assets overseas and fail to report income from offshore accounts, the longdormant FBAR penalty has become a potent weapon in the IRS's arsenal. IRS agents examining taxpayers who made quiet disclosures or failed to report income from offshore accounts have been told to be "aggressive,"25 leading to the assertion of one or more 50% willfulness penalties under 31 USC §5321(a)(5)(C).26

    Because the Flora rule does not apply to nontax cases, a person against whom an FBAR penalty is assessed can pay a small portion of the assessment. Because there are no statutory or regulatory prerequisites for maintaining an action to recover the payment, there is no need to file a refund claim. The period of limitations for bringing an action under the Tucker Act and the Little Tucker Act is six years after the right of action accrues.44 There is no right to a jury trial in the Court of Federal Claims. There is also no right to a jury trial for an action to recover money from the Federal government.45 A person is entitled to a jury trial in an action by the Government to impose liability for a civil penalty.46 Thus, if an action is brought in district court to recover $10,000 or less paid towards a FBAR penalty and the government counterclaims for the unpaid balance, the plaintiff can demand trial by jury.

  3. Michael J. MillerMarch 17, 2014 at 7:25 AM

    Interesting that agents have been "told to be "aggressive'" in offshore cases involving QDs. I would think they have a responsibility to be fair, and that a taxpayer who declines to participate in OVDI/P should be entitled to the same consideration of his arguments as one who participates and opts out. It's very troubling if the standard is not the same.


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