Wednesday, July 14, 2021

Second Circuit Continues the Strong Consensus Rejecting the Argument that FINCen Regulations Under Pre-2004 Law Limit the Maximum Willful Penalty Prescribed under the 2004 Statutory Amendment (7/14/21)

In United States v. Kahn, ___ F.3d ___, 2021 U.S. App. LEXIS 20622 (2d Cir. 7/13/21), here, the Court held, consistent with the trend of cases after two district court burps, that the FBAR willful penalty in 31 USC § 5321(a)(5), here, as amended in 2004 to increase the maximum amount of the penalty, is not limited by the FINCen’s failure to update the underlying regulations which, consistent with pre-2004 law, capped the willful penalty at $100,000.  Readers of this blog should already be aware of the issue and the trend in the cases.  The majority opinion, while lengthy, does not break new ground in analysis of the issue, so I won’t address the majority opinion further, other than to say that, as of today, it is the definitive opinion, collecting and discussing the key issues and key cases, so it should be a starting point for those wanting to get into the issue as of now.

I offer a brief detour:  There is a dissent in the case by Judge Steven Menashi (Wikipedia here).  Judge Menashi thrashes around in administrative law concepts that were not persuasive to the majority on the panel.  I don't find them persuasive either. In my view, Judge Menashi's dissenting opinion is ideologically tinged (Judge Menashi is a Trump appointee and, as might be expected, a member of the Federalist Society) which means that he is inclined to distrust the bogeyman of the administrative state,  So he just could not resist going down the Chevron deference path.  I may write something on that but, if I do, will post it on my Federal Tax Procedure Blog where I deal with administrative law and Chevron issues.  In the meantime, I can't imagine that readers of this blog interested principally in Federal Tax Crimes will find any particular enlightenment in Judge Menashi's dissenting opinion.  Of course, the current Supreme Court weighted toward Judge Menashi's ideological bent might want to thrash around these issues in a case like Kahn and, if so, create great mischief.

Added 7/18/21 11:45am:

1.  I posted on Judge Menashi's thrashings here:  Does Treasury Comply with Administrative Law, Including the APA? I Say Yes. Others Say No. (Federal Tax Procedure Blog 7/17/21), here.

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