The key points of the original memorandum that I find interesting are:
1. The FBAR penalty provisions are "only maximum penalty amounts, leaving the IRS to determine the appropriate FBAR penalty amount based on the facts and circumstances of each case." I think we all knew that, but I am glad the IRS is reminding its agents of that proposition.
2. Attachment 1 provides procedures
developed to ensure consistency and effectiveness in the administration of FBAR penalties. They will help ensure FBAR penalty determinations are adequately supported and penalties are asserted in a fair and consistent manner. Examiners must continue to use their best judgment when proposing FBAR penalties. They must take into account all the available facts and circumstances of a case. See IRM 188.8.131.52.7, FBAR Penalties -- Examiner Discretion, concerning the use of examiner discretion when proposing FBAR penalties.3. The following are from Attachment 1 (bold-face supplied by JAT except for headings):
(2) Penalty Amount for Willful Violations
For each year for which it is determined that there was a willful violation, examiners must fully develop and adequately document in the examination workpapers their analysis regarding willfulness. The examiner's report should clearly state the years for which it was determined that an FBAR violation was willful.
For cases involving willful violations over multiple years, examiners will recommend a penalty for each year for which the FBAR violation was willful. In most cases, the total penalty amount for all years under examination will be limited to 50 percent of the highest aggregate balance of all unreported foreign financial accounts during the years under examination. In such cases, the penalty for each year will be determined by allocating the total penalty amount to all years for which the FBAR violations were willful based upon the ratio of the highest aggregate balance for each year to the total of the highest aggregate balances for all years combined, subject to the maximum penalty limitation in 31 U.S.C. § 5321(a)(5)(C) for each year.
Example: Assume highest aggregate balances of $50,000, $100,000, and $200,000 for 2010, 2011, and 2012, respectively. The total penalty amount is $100,000 (50 percent of the $200,000 highest aggregate balance during the years under examination). The total of the highest aggregate balances for all years combined is $350,000. The penalty for 2010 is $14,286 ($50,000/$350,000 x $100,000). The penalty for 2011 is $28,571 ($100,000/$350,000 x $100,000). The penalty for 2012 is $57,143 ($200,000/$350,000 x $100,000). The penalty amounts for each year are subject to the maximum penalty limitation in 31 U.S.C. § 5321(a)(5)(C).\
Examiners may recommend a penalty that is higher or lower than 50 percent of the highest aggregate account balance of all unreported foreign financial accounts based on the facts and circumstances. In no event will the total penalty amount exceed 100 percent of the highest aggregate balance of all unreported foreign financial accounts during the years under examination. The examiner's workpapers must support all willful penalty determinations and document the group manager's approval.
(3) Penalty Amount for Nonwillful Violations