FBAR Willful Penalty (with Collection Suit) after OVDP Drop Opt-Out (9/1/22)

The Government filed an FBAR collection suit in United States v. Leeds (Idaho No. 22-cv-00379-BLW), see TaxNotes copy of complaint here.  The defendant “is the surviving spouse of Richard Leeds, named in her capacity as a potential successor-in-interest to the Estate of Richard Leeds “(Estate”) and/or as a potential personal representative or administrator of the Estate and/or distributee of the Estate.”)

The complaint is about what one would expect in an FBAR collection suit, with slight variances in facts.  However, the following caught my attention:

36. In December of 2014 Mr. Leeds applied to participate in the IRS's Offshore Voluntary Disclosure Program and was initially accepted.

* * * *

39. In April 2018 Mr. Leeds opted out of the OVDP and an IRS examination commenced.

The IRS then proposed a willful FBAR penalty, eventually resulting in this collection suit to collect the penalty.

That is all I know about the facts, but I have these questions, with some speculation as to answers:

1. Since Mr. Leeds knew what the OVDP cost would be going into the program, why would he opt out?  I can only speculate that he wanted to get the benefit of the criminal prosecution protection OVDP offered.  Otherwise, going into OVDP knowing the civil cost would be unacceptable makes no sense.

2. In any event, why would someone with his facts (from the complaint) opt-out of OVDP after he had disclosed his behavior by the OVDP filing?  I can’t even speculate about that other than perhaps he had some vague hope that the IRS would drop the ball in his case.  Remember, that if he had a good nonwillful story, he could have made a Streamlined Filing; I assume he entered OVDP because he (or his counsel) thought he did not have a good nonwillful story.

Interesting Complaint in FBAR Collection Suit (5/14/21)

In an original willful FBAR collection complaint filed in United States v.Beyder (D. N.J. Dkt. 3:21-cv-10864 5/6/21 ), here, the following interesting allegations are made:

17. Larisa Beyder has refused to provide bank statements for the BSI ‘999 account. 

18. Larisa Beyder’s father was indicted in 2010 and later pled guilty for a criminal offense related to a failure to file FBARs. Larisa Beyder was the Third-Party Custodian for her father while he awaited sentencing. Larisa Beyder had her BSI ‘999 account at this time. 

* * * *

30. Eduard Beyder has refused to provide bank statements for the BSI ‘453 account.

31. Eduard Beyder’s father-in-law was indicted in 2010 and later pled guilty for a criminal offense related to a failure to file FBARs. Eduard Beyder had the BSI ‘453 account at this time. 

* * * *

33. On May 9, 2019, a delegate of the Secretary of the Treasury assessed civil penalties against Larisa Beyder under 31 U.S.C. § 5321(a)(5) in the amounts of: $258,851 for 2006; $258,851 for 2007; $248,070 for 2008; $248,070 for 2009; $200,566 for 2010; and $152,344 for 2011, for a total assessed amount of $1,366,752. 

* * * *

37. As of April 12, 2021, Larisa Beyder is indebted to the United States with respect to the penalties described in Paragraph 33, above, in the amount of $1,549,185.31, plus statutory additions that continue to accrue thereafter as provided by law. 

38. On May 14, 2019, a delegate of the Secretary of the Treasury assessed civil penalties against Eduard Beyder under 31 U.S.C. § 5321(a)(5) in the amount of $100,000 per year for each of the 2007 through 2011 calendar years, for a total assessed amount of $500,000. 

* * * * 

42. As of April 12, 2021, Eduard Beyder is indebted to the United States with respect to the penalties described in Paragraph 38, above, in the amount of $566,835.62, plus statutory additions that continue to accrue thereafter as provided by law.

JAT Comments:

District Court Denies Gov't Summary Judgment in FBAR Collection Suit (6/4/20)

In United States v. de Forrest (D. Nev. Dkt. # 2:17-cv-03048 Dkt entry 52, Order dated 5/31/20), here (with docket entries here), the court denied the Government’s motion for summary judgment in an FBAR willful penalty collection suit.  I don’t think the Order offers anything material to the discussion of FBAR willful penalty matters, except that, on the facts recounted, I speculate that other judges might have granted the Government’s motion.  And, on the facts recounted, if this judge were the “fact decider” (she is not because de Forrest demanded a jury), I am not sure de Forrest would prevail because the facts do not look particularly good.  I did note that the court says (Slip Op. at 3):  “Defendant asserts that over the course of their relationship, Mr. de Forrest [the money guy who started the offshore accounts] warned Defendant 'not to say anything about anything' regarding the the Swiss accounts. (Def. Dep. 42:22–43:1).2,” with the footnote saying:  “n2 In her Response, Defendant asserts that her husband threatened to murder her if she told anyone about the accounts. (Resp. at 2). However, there is no citation supporting this claim.”

The Defendant in the case demanded a jury.  I have previously discussed a jury trial in FBAR refund and collection suits in Outstanding Powerpoint Presentation on All Things FBAR Penalties (Procopio #1) (11/5/18), here.  I wonder which party a jury might favor as compared to a judge (this judge in particular).  The Government did not demand a jury on the original complaint.  There is no explanation for why the Government did not demand a jury, but it may have been simply because bench trials are easier and more expeditious than jury trials.  (At the margins, some judges might prefer to punt the fact issue to a jury rather than actually deciding the issue on motion for summary judgment.)  I do know that, from my experience in refund litigation with DOJ Tax, my attention was heightened when I got a refund suit with no jury demand by the taxpayer and I would sometimes demand a jury if there were some reason to believe that a jury would be more favorable to the Government.  Where I litigated, in the deep South in the mid-1970s,  the general understanding was that, except in some types of cases, a jury would not be more favorable – indeed likely to have at least one juror hostile -- to the Government (have war stories there, but won’t digress here).  Most tax litigators in the South knew that and would almost routinely demand a jury in a tax refund suit, so when the taxpayers did not demand a jury, that was worthy of attention.

Court Denies Motion to Dismiss FBAR Collection Suit (4/30/20)

In United States v. Green (S.D. Fla. Dkt. 1:19-cv-24026-KMM, Order dated 4/27/20), CourtListener here, the Court denied a motion to dismiss, holding (i) that the FBAR willful penalty survived the death of the person penalized and (ii) that the Government’s complaint adequately alleged willfulness.  These are, by now, standard holdings, so I do not discuss them.

I do note the following interesting fact (Slip Op. p. 6-7.):

On October 31, 2013, Marie applied to enroll in the IRS’s 2012 Offshore Voluntary Disclosure Program (“OVDP”), which offered a coordinated, standardized settlement to U.S. taxpayers who had failed to report foreign bank accounts by filing FBARs and failed to pay income tax on income received in those foreign bank accounts. Id. ¶ 49. After Marie enrolling into the 2012 OVDP, she attempted to “directly enter” another offshore disclosure program offered by the IRS. Id. ¶ 51. After Marie was informed that she was not allowed to directly enter the other program, she informed the IRS that she intended to withdraw from the 2012 OVDP and the IRS removed her from the program. Id. ¶¶ 51, 52. On June 1, 2017, a duly authorized delegate of the Secretary assessed civil penalties against Marie for willfully failing to file FBARs for 2010 as to the BoJ and Templaide Accounts, and 2011 [*7] as to the BOJ account. Id. ¶ 60. 

Court Enters Default Judgment in FBAR Willful Penalty Collection Suit (1/10/20)

In United States v. Lanz, 2019 U.S. Dist. LEXIS 222922 (D. N.J. 2019), CL here, the district court entered default judgment against the defendant, Lanz, in an FBAR willful penalty collection suit.  The judgment is for "$544,731.73 for the penalties assessed against him under 31 U.S.C. § 5321(a)(5), accrued interest on such penalties, late payment penalties, and further statutory additions thereon as allowed by law from August 19, 2015, to the date of payment."

The key excerpts are:

Third, the Court finds that the Complaint states a sufficient cause of action. Plaintiff alleges that Defendant violated the reporting requirements of 31 U.S.C. § 5314, as implemented under 31 C.F.R. § 1010.350 and 31 C.F.R. § 1010.306(c), for calendar years 2006, 2007, and 2008. (Compl. ¶ 20). As Plaintiff explains, "[a]ll citizens and residents of the United States who have a financial interest in, or signatory or other authority over, any foreign financial account that had a maximum value greater than $10,000 during the calendar year are required to file an annual report disclosing the existence of each account." (Compl. ¶ 5 (citing 31 U.S.C. § 5314 & 31 C.F.R. § 1010.350)). That annual report—known as a Report of Foreign Bank and Financial Accounts ("FBAR")—is due no later than June 30th of the year following the calendar year. (Id. ¶ 6 (citing 31 C.F.R. § 1010.306(c)). Plaintiff alleges that Defendant was subject to these reporting requirements because Defendant was a U.S. citizen who held a foreign bank account, and the aggregate amount in that account exceeded $10,000 in U.S. currency during 2006, 2007, and 2008. (Compl. ¶¶ 9-12). Plaintiff further alleges that Plaintiff failed to (i) report the income generated in the Account on his federal income tax returns; (ii) [*7]  file an FBAR as required for 2006, 2007, and 2008; and (iii) report having an interest in a foreign bank account on Schedule B of his income tax returns for at least 2006 and 2008. (Id. ¶¶ 13-15). Based on these allegations, the Court finds that Plaintiff has sufficiently stated a cause of action for failure to comply with the reporting requirements of 31 U.S.C. § 5314. 

Moreover, the Court finds that the Complaint provides sufficient basis for the Court to determine that Defendant's failure to report was willful. Willfulness covers both knowing and reckless violations, and "may be proven through inference from conduct meant to conceal or mislead sources of income or other financial information." United States v. Williams, 489 F. App'x 655, 658 (4th Cir. 2012). Here, Plaintiff alleges several facts suggesting that Defendant acted willfully: (i) Defendant took steps to hide his ownership of the Account by telling UBS AG to hold all correspondence relating to the Account (Compl. ¶ 9); (ii) Defendant falsely told the IRS twice that he did not own a foreign bank account, and signed an affidavit stating that he did not have a foreign bank account during 2008 (id. ¶ 17); and (iii) Defendant eventually transferred the Account that he held in his name to another bank and [*8]  put the Account in the name of another person (id. ¶¶ 10-11). These actions suggest that Defendant acted willfully in failing to report his ownership and interest in the Account. See United States v. Brandt, No. 17-80671, 2018 U.S. Dist. LEXIS 226286, 2018 WL 1121466, at *4 (S.D. Fla. Jan. 24, 2018) (finding a willful reporting violation under similar circumstances).

Court of Appeals for Federal Circuit Affirms CFC Norman Holding that Taxpayer is Subject to FBAR Willful Penalty (11/10/19; 11/13/19)

In Norman v. United States, (Fed. Cir. 11/8/19), here, the Federal Circuit sustained an FBAR willful penalty, holding:

1. FBAR willfulness includes recklessness, as held by two other Circuits:  Bedrosian v. United States, 912 F.3d 144, 152–53 (3d Cir. 2018); United States v. Williams, 489 F. App’x 655, 658–59 (4th Cir. 2012).

2.  The Court of Federal Claims ("CFC") did not err in holding that Norman was willful for the following reasons (Slip Op. 7-8):

The Court of Federal Claims did not clearly err in finding that Ms. Norman’s failure to file an FBAR was willful. Ms. Norman signed her 2007 tax return under penalty of perjury, and this return falsely indicated that she had no interest in any foreign bank account. She did so after her accountant sent her a questionnaire that specifically asked whether she had a foreign bank account. In addition, the evidence shows that Ms. Norman took the following steps, each of which had the effect of inhibiting disclosure of the account to the IRS: (1) Ms. Norman opened her foreign account as a “numbered account”; (2) she signed a document preventing UBS from investing in U.S. securities on her behalf; and (3) the one time she withdrew money from the account, her Swiss bank account manager delivered the money to her in cash. 

Moreover, once the IRS opened an audit of Ms. Norman, she made many false statements to the IRS about her knowledge of, and the circumstances surrounding, the account. Ms. Norman told the IRS, both during an interview and in a letter, that she first learned of the account in 2009. In her letter, she stated that she “was shocked to first hear about the existence of foreign accounts” in her name. In 2014, after retaining counsel, Ms. Norman sent the IRS another letter “to correct several misstatements.” Although Ms. Norman admitted in this 2014 letter that she knew [*8] “more than a decade ago” that she had an “interest” in a foreign bank account, she maintained in the 2014 letter that “none of the money in the Swiss account(s) was mine[,] and I did not consider myself to have any kind of control over the account.” J.A. 146. In fact, Ms. Norman knew long before 2009 that she owned a foreign bank account and controlled its assets. She opened the account in 1999, actively managed the account for many years, and even withdrew money from the account in 2002.

3.  In making the holding, the Court rejected that argument that her mother advised her do it.  (Slip Op. 8.)

4.  Also, the Court rejected the claim that she did not know because she did not read the return she signed.  Even if she did not, she had constructive knowledge and acted recklessly.  (Slip Op. 8-9.)

6.  The Court rejected her argument that the unamended regulations after the 2004 amendment increasing the penalty to $100,000 or 50% of the acccount prevented a penalty exceeding $100,000 (the maximum under the pre-amendment statute).  Basically, the court held that the amendment trumped the regulations that preceded the amendment.

7.  The Court declined to reach Norman's argument, launched too late, that the FBAR willful penalty was an excess fine under the Eighth Amendment.

8.  For an excellent discussion of the Norman case, see Robert S. Horwitz, Federal Circuit Upholds Liability for FBAR Willful Penalty, Determines the Regulation Limiting Penalty to $100,000 Is Invalid (Tax Litigator Blog 11/11/19), here.

JAT Comments:

FBAR Collection Suit Settled Before Jury Verdict Announced (8/27/19)

I previously reported on pretrial skirmishing in the Government's FBAR collection suit in United States v. Dadurian (S.D. Fla. 9:18-cv-81276).  See Court Denies Motion for Partial Summary Judgment on FBAR Willful Penalties (Federal Tax Crimes Blog 8/16/19), here, and Two New FBAR Opinions -- Nothing New Here (Federal Tax Crimes Blog 6/27/19), here.  I report here on the conclusion of the case.

The case went to trial and was submitted to the jury.  Before the verdict was announced, however, the parties settled the case, where the Government originally sought judgment for $2.7 million, for $1 million.  (However, see below as to how the settlement will be effected.) Apparently, there was some drama involved because the jury reached a verdict before the settlement was finally reached, so the parties had to choose to complete the settlement or accept the jury verdict (then unknown, although reached).  See FBAR Trial Settles With Recklessness Standard, TNT (8/29/19) (with the estimable Lee A. Sheppard contributing to the article).  I do not have a link to the article because it is behind a paywall, and getting Tax Analysts' permission to post is a nuisance, as well as (in my experience) requiring some wait period before posting.  Those with a TNT subscription should just go look at it there, although the important details are no different than I offer here drawn solely from the court documents I retrieved from Court Listener (which everyone can access free here).

The jury verdict held Dadurian liable for the accounts she had caused to be set up, but as noted the jury verdict does not control.  I have not attempted to determine the amount of the liability based on the jury verdict, but it was substantially less than the $2.7 million the Government claimed.

Here are the relevant documents from Court Listener:

• The Stipulation Regarding Settlement, here.
• The Jury Verdict (Mooted by the Settlement), here.

JAT Comments:

1.  Nothing particularly unusual here except, of course, the drama in having to choose between the settlement and the unknown jury verdict.

2.  The Stipulation Regarding Settlement is, I think, somewhat noteworthy as to how the settlement gets effected.  Here is the relevant part:  “The material terms of the settlement are as follows: Dadurian will stipulate to a judgment in the full amount of the penalties, plus interest accruing under 31 U.S.C. § 3717. The United States will agree to mark the judgment satisfied if Dadurian pays the United States $1,000,000.00 within 90 days of today.” So, there will be a judgment indicating Dadurian's liability for the full amount and then the judgment liability will be settled for $1 million.  (I guess this sentence is redundant, but that seems a strange way to effect a settlement; it seems to me the more straightforward way to settle would be to enter judgment in the amount of the settlement; if anyone knows why the settlement was structured in this way, please make a comment or email me at jack@tjtaxlaw.com.

Addendum 8/27/19 2:45pm:

3.  With regard to Comment #2, Bob Steinberg, an attorney-CPA, in Palmetto Bay Fl., asks whether this settlement format will give rise to cancellation of indebtedness income.  I think I can argue that both ways (if I had to).  Still, I would presume that somebody addressed that issue in reaching the settlement.  However, I would appreciate any analysis of that issue that readers may make either by comment or by email jack@tjtaxlaw.com.

FBAR Collection Suit for over $105 Million (8/20/19)

A fellow practitioner alerted me to the FBAR collection suit in United States v. Burga (N.D. Cal. No. 19-cv-03246.)  The Court Listener docket entries are here.  As of this writing, the docket entries (through 8/2/19) show routine entries other than the complaint.  The complaint (from Court Listener) is here.

Note on access to court listener documents, see the last paragraph of this blog.

The complaint is against Francis Burga and her deceased husband (with Francis serving as administrator).  The willful FBAR penalties are $52,581,605 against each, husband and wife, and thus aggregate $105,163,210.  There are also late payment penalty, fees and interest on the base FBAR penalties.

The complaint is pretty damning.  Here are some items in the complaint:

1.  The defendants had "financial interest in at least 294 foreign bank accounts, in various countries, during at least years 2004 through 2009." (Compl. par. 12, which lists the accounts from p. 3 to p. 11.)

2.  The defendants created a Liechtenstein foundation that established complex structures of entities, numbering at least 25, based in Liechtenstein, Switzerland, Singapore and other European and Asian countries.  (Compl. par. 33-35.)

3.  The defendants signed documents with UBS indicating that they were U.S. citizens subject to U.S. tax and directing that statements not be sent to them and that the account not invest in U.S. securities (which would have triggered a U.S. information reporting by UBS).  (Compl. pars. 39-41,)

4.  During an audit in 2007 (apparently August 7, 2007), Mr. Burga told the IRS Revenue Agent conducting the interview that he and Ms. Burga did not have any foreign bank accounts, foreign corporations or foreign trusts.  (Compl. par. 44.)

5.  Immediately after the IRS interview, Mr. Burga moved all of the funds (over $6 million) from the UBS account and into a Liectenstein stiftung, for which Mr. Burga was founder and owner.  (Compl. pars. 45 & 46.)

6.  "Mrs. Burga has admitted that Mr.Burga is liable for the civil FBAR penalties assessed."  (Compl. par. 55.)

7.  The complaint does not have a spreadsheet with the amounts of the willful FBAR penalty for each account per year.

There is a related summons enforcement suit filed in 2018, styled United States v. Burga (N.D. Cal. 18-cv-01633), here on Court Listener.

Court Denies Motion for Partial Summary Judgment on FBAR Willful Penalties (8/16/19)

A colleague alerted me to a Tax Notes article, titled Practitioners Balk at Potential DOJ Willful FBAR Argument (Tax Notes 8/16/19).  The Tax Notes link is here, but requires a subscription.  Here is the opening from the article:

Practitioners are disturbed by a possible legal stance of the Justice Department in the latest dust-up over foreign bank account reporting, which would negate reliance on a professional as a defense to willful penalties. 

Tax Notes talked with two practitioners following filings of a joint pretrial statement and proposed jury instructions in Dadurian that seemingly advanced that stance on the part of  the government. Later filings on August 15 that came in after those conversations  appear to be taking a slightly softer stance. How exactly the case will be argued at trial remains to be seen, however.  

“The government is pushing the envelope,” Steven Toscher of Hochman Salkin Toscher Perez PC said. “While most of the courts have untethered willfulness in FBAR cases from its traditional meaning, a taxpayer’s good faith — including reliance on a professional — has always been considered a defense to willful penalties.” 

In June the U.S. District Court for the Southern District of Florida denied summary judgment for Daniela Dadurian, who is facing a $2.7 million liability for failing to file FBARs for accounts owned by herself, her mother, and several foreign entities after she failed to convince the court that there’s no evidence of willfulness regarding five of the accounts at issue.  

The Justice Department has alleged that Dadurian had financial interest in or signatory authority over several foreign accounts — some with maximum balances of over $2 million in some years — but indicated on her 2007 to 2010 tax returns that she did not have such interest or authority. According to the complaint, while Dadurian had filed FBARs for Swiss and German accounts before 2007, she failed to tell Anthony Caruso, her tax return preparer for the years at issue, about her foreign assets. 

The defense, however, asserts that she did not willfully fail to report her accounts because she relied on her tax attorneys’ advice that she did not need to disclose them.  

As explained by the district court in its summary judgement order, under 31 U.S.C. section 5321(a)(5), reasonable cause is not a defense to willful FBAR violations. The court further noted that reliance on a professional may constitute reasonable cause for underpayments of tax.

Those interested and with access to Tax Notes should track down the full article with more detail.

I pulled up some documents from the case from the pacer.gov web site docket entries.  The case is United States v. Dadurian (S.D. Fla. 9:18-cv-81276).  The documents are:

Default Judgment Entered Against Convicted Defendant Who Agreed to Penalty (2/27/19)

In  United States v. Sarshar, 2019 U.S. Dist. LEXIS 27845 (C.D.Cal.2019), the court rendered default judgment against Masud Sarshar in the Government's FBAR collection suit to recover a willful FBAR penalty of $18,242,537.65 plus interest.  (I don't provide a link because it is a straight default judgment after the defendant had already agreed to the penalty at sentencing (see below).)

Sarshar had previously pled for conspiracy and tax obstruction and was sentenced to 24 months in prison.  See my prior blogs (reverse chronological order):

• Taxpayer with Israeli Bank Accounts Sentenced to 24 Months (Federal Tax Crimes Blog 3/13/17; 3/18/17), here.
• Another Plea to Offshore Account Tax Crimes (Federal Tax Crimes Blog 8/1/16), here.

The sentencing blog entry notes from the DOJ Press Release:

 In addition to the term of prison imposed, Sarshar was ordered to serve three years of supervised release and to pay more than $8.3 million in restitution to the IRS, plus interest and penalties. Sarshar also agreed to pay an FBAR penalty of more than $18.2 million for failing to report his Israeli bank accounts.

Since Sarshar had already agreed to the FBAR penalty, the suit was just a formality required by the 2 year period to file the suit.

FBAR Collection Suit Against Person Convicted of Willfully Failing to File FBAR (12/11/18)

I have previously written on the criminal conviction of Arvind Ahuja.  See Prominent Neurosurgeon Convicted for Offshore Accounts (Federal Tax Crimes Blog 8/23/12), here. On December 7, 2018, the Government filed an FBAR willful penalty collection suit for a single willful penalty for the year 2009 in the amount of $4,662,540.50.  United States v. Ahuja (E.D. Wisc. Dkt. No. 18-cv-01934).  The Complaint is here (from Court Listener).  As of today, no answer has been filed.

Key excerpts:

On Willfulness:

15. On his IRS Form 1040 for 2009, Ahuha checked “no” on that part of Schedule B requiring him to disclose his interest in foreign bank accounts.  

16. In August of 2008 and on subsequent dates, Ahuja’s accountant informed Ahuja of his obligation to report his interest in any foreign financial accounts. Ahuja knew or should have known he had a duty to report his interest in the foreign financial accounts. 

* * * *  

23. On August 22, 2012, Ahuja was found guilty by a jury in this district for, among other charges, his willful failure to submit a Report of Foreign Bank and Financial Accounts and filing a false income tax return for the year  ending December 31, 2009 in the case of United States v. Arvind Ahuja, Crim. No. 2:11-cr-00135-CNC (E.D. Wisc.). 

 On the FBAR penalty assessment and amount due:

19. On July 12, 2017, a delegate of the Secretary of the Treasury timely made an assessment in the amount of $4,622,540.50, under 31 U.S.C. § 5321, against the defendant, Arvind Ahuja, for his willful failure to submit a FBAR for the year ending December 31, 2009, and assessed both a late-payment penalty of $63,069.19, under 31 U.S.C. § 3717(e)(2) and 31 C.F.R. § 5.5(a), plus interest. The amount assessed under 31 U.S.C. § 5321 is commonly known as a “FBAR Penalty.” The FBAR Penalty assessed is 50% of the account balance on the day of the FBAR violation.  

* * * * 

22. With interest and other statutory accruals, the amount due with respect to the assessment described above is, as of September 19, 2018, $5,007,288.38. The United States is entitled to judgment in its favor and against Ahuja in this amount, plus statutory additions including interest according to law.

JAT Comments: 

District Court Rejects Motion to Dismiss Based on Colliot and Wadhan Because Each Year Willful Penalty Less than $100,000 (12/10/18)

In United States v. Shinday, 2018 U.S. Dist. LEXIS 205372 (C.D. Cal. 2018), an FBAR collection suit, the defendants (husband and wife) had foreign accounts at UBS and at State Bank of India. I excerpt some of the history of the accounts below.  The Government assessed multi-year willful penalties against the husband and five single year $10,000 nonwillful penalties against the wife.  The Government is suing to obtain judgment on the assessments.  The defendants moved to dismiss, and the Government opposed.  (The motion to dismiss is here and the opposition is here.) The Court denied the motion (here with Court Listener copy here; the Docket Entries on Court Listener here permit some of the documents to be downloaded).  ).

Key excerpts (don't tell the full story but enough that, I think, readers will get the key points):

The government alleges that in 2002, UBS prepared a memorandum indicating that defendants asked UBS whether Nila’s brother could withdraw $50,000 of defendants’ funds from UBS’s London branch without it being reported. Id. 

* * * * 

In 2008, UBS again notified defendants of new laws applying to U.S. citizens with foreign bank accounts, and recommended that defendants close their UBS account. Id. ¶ 23. Defendants soon after transferred the funds in their UBS account to their accounts at the State Bank of India (“SBI”), a bank in India, and eventually closed their UBS account. Id. 

The government alleges that before defendants closed their UBS account, defendants’ UBS account had year-end balances of $350,019 in 2005, $361,819 in 2006, $420,893 in 2007, and $15,003 in 2008. Id. ¶ 9. Defendants also had “as many as twenty-nine and as few as seven fixed deposit accounts at the State Bank of India[,]” from the years 2005 to 2011. Id. ¶ 10. Defendants’ SBI accounts had aggregate year-end balances of $444,035 in 2005, $669,729 in 2006, $258,079 in 2007, $306,647 in 2008, $411,502 in 2009, $216,530 in 2010, and $362,506 in 2011. 

* * * * 

C. Defendants’ Failure to Disclose their UBS and SBI Accounts 

Defendants filed joint federal income tax returns for the 2005 to 2011 tax years, utilizing a certified public accountant to file those returns. Id. ¶ 25. The returns included a Schedule B, Interest and Dividends, which, inter alia, requires defendants to (1) report domestic or foreign interest or dividends, and (2) state whether they have  a financial account in a foreign country. Id. ¶¶ 26–27. Defendants did not report the interest or dividends associated with their UBS and SBI accounts for 2005 to 2010. Id. ¶ 26. They checked a box on the Schedule B form for their 2005 to 2010 tax returns indicating that they did not have foreign accounts during those years. Id. ¶ 27. Defendants signed those returns, under penalty of perjury. Id. 

For defendants’ 2011 tax return, defendants disclosed their SBI accounts, but failed to do so in a timely manner. Id. ¶ 29. The IRS then audited defendants’ 2005 to 2011 tax returns. During the audit, defendants ultimately disclosed two Canadian investment accounts, as well as the UBS and SBI accounts. Id. ¶ 30. 

D. IRS Penalty Assessments against Defendants 

The government alleges that the IRS thereafter assessed penalties against defendants based on their UBS and SBI accounts. Id. ¶¶ 31–32. The government claims that on or around August 23, 2016, the IRS assessed non-willful FBAR penalties against Nila for the tax years 2007 to 2011. Id. ¶ 31. Each penalty was $10,000, totaling $50,000. Id. The government alleges that on or about August 23, 2016, the IRS also assessed willful FBAR penalties against Money for the tax years 2007 to 2011. Id. ¶ 32. The aggregate amount of the penalty was $257,888, which represents 25% of the combined 2006 year-end balance of defendants’ UBS and SBI accounts, equaling $1,031,548. Id. This total was then divided equally, in order to apply penalties equally for each year starting in 2007 and ending in 2011. Id. 

* * * * 

As the government argues, the facts of Colliot and Wadhan are thus inapposite to this case because the five penalties assessed against Money are individually all less than $100,000. Compl. ¶ 32; Opp’n at 3. Although in the aggregate the penalties against Money total $257,888, the yearly, individual penalties are each approximately $51,578. Id. Each time Money allegedly willfully failed to timely file an FBAR, the IRS assessed a penalty. Compl. ¶ 32. The penalties were imposed for separate, if successive, alleged FBAR violations resulting from defendants’ failure to file FBAR reports in 2007, 2008, 2009, 2010, and 2011. Id. This is within the bounds of 31 C.F.R. § 1010.820(g) (“For any willful violation committed . . . the Secretary may assess upon any person, a civil penalty . . . not to exceed the greater of the amount (not to exceed $100,000) equal to the balance in the account at the time of the violation, or $25,000.”) (emphasis added). n1 
   n1 In addition to arguing that its penalties do not violate 31 C.F.R. § 1010.820’s $100,000 cap, the government also argues that 31 C.F.R. § 1010.820 was invalidated by the 2004 amendment to Section 5321. Opp’n at 5, 9 (citing Norman, 138 Fed. Cl. at 195 – 96 (involving Mindy Norman, finding that the $100,000 penalty cap established by 31 C.F.R. § 1010.820 is invalid because “Congress clearly raised the maximum civil money penalty in § 5321 to the greater of $100,000 or one half of the balance of the account”)). In essence, the government argues that even if the $100,000 penalty cap applied in the aggregate, the amendment in Section 5321 would permit the government to apply a penalty in excess of
$100,000. The Court need not reach this issue, however. Irrespective of whether Section 5321 invalidates the Department of Treasury’s implementing regulations, there was no year in which Money was penalized for more than $100,000.

JAT Comments:

Outstanding Powerpoint Presentation on All Things FBAR Penalties (Procopio #1) (11/5/18)

I post a Powerpoint Presentation (in pdf format), here, that was offered at the 14th Annual University Of San Diego School Of Law Procopio International Tax Institute last week.  The panel was titled "Summer of Norman, Wahdan [sic Wadhan], Colliot:Defending Title 31 FBAR penalties: Pre and Post-Assessment, IRS & DOJ Policies and Strategy," and the panelists were

• Caroline D. Ciraolo, of Kostelanetz & Fink, here.
• Robert S. Horwitz of Hochman Salkin Toscher & Perez PC, here.
• Patrick W. Martin of Procopio, et al., here

This is really a great current discussion on all facets of FBARS, including

• FBAR penalties, 
• FBAR penalty assessments, 
• the Offshore Voluntary Disclosure programs, 
• FBAR Audits and Litigation (including Government collection suits and FBAR penalty refund suits), 
• FBAR willfulness and reasonable cause, 
• FBAR administrative collection
• And more.

When getting permission to post this, I did engage in discussing with the authors one issue related to pp. 32&33 of the PowerPoint.  The FBAR penalty refund suit as stand alone litigation is a trial to the judge; no jury trial is available.  The FBAR penalty collection suit can be tried to a jury.  Now, as tax lawyers are familiar, subject to the Flora full payment rule in much tax litigation, when the taxpayer files a proper tax refund suit after not paying the full amount (perhaps for other events or years), the Government will counterclaim for the unpaid balance.  For example, in TFRP cases, the putative responsible person can make partial payment and the Government will counterclaim.  The counterclaim is a collection suit in response to the refund suit.  Applying those concepts to the FBAR context (although outside Title 26), in theory the FBAR penalty refund case should be decided by the judge, and the counterclaim / collection case could be tried to a jury if either side demanded a jury.  That is an odd situation and at least offers the theoretical possibility, if not mitigated somehow, that the judge could reach a decision on the refund case that is inconsistent with the jury verdict on the counterclaim / collection case.  I say it is theoretical, because I think it would be unlikely for practical reasons.  Still:

FBAR Collection Suit Where Taxpayer Put in Writing to UBS That He Wanted to Avoid Disclosure to IRS and Opted Out of OVDP (9/5/18)

The Government brought the following FBAR collection suit:  United States v. Gentges (USDC SDNY Dkt. 7:18-cv-07910), complaint here and Court Listener docket here.  Excerpts that I think are interesting from the complaint are:

15. In November 2001, Gentges signed documents to open the 4959 Account, choosing to open it as a numbered account rather than a “name account.” He identified himself as the beneficial owner of the 4959 Account and listed his address in Hawthorne, New York. 

16. Gentges instructed UBS not to invest in U.S. securities, and signed an instruction to UBS stating, “I would like to avoid disclosure of my identity to the US Internal Revenue Service under the new tax regulations. To this end, I declare that I expressly agree that my account shall be frozen for all new investments in US securities as from 1 November 2000.” 

17. Gentges instructed UBS to retain his mail at the bank, for a fee, rather than mailing it to his address in New York. Subsequently, when Gentges would visit the bank in Switzerland—including three instances in 2007 alone—he retrieved his mail and then authorized UBS to destroy the mail that he did not take with him. 

 * * * * 

C. Subsequent Dealings with UBS and Closure of the Accounts 

32. In September 2008, Gentges was informed by UBS personnel that he had to either file an IRS form W-9 or close his UBS accounts by the end of the year. 

33. Instead of filing an IRS form W-9 and/or making a voluntary disclosure at that time, in September and October 2008, Gentges instructed UBS to transfer securities from his UBS accounts to Migros Bank, another financial institution based in Switzerland. 

34. In November 2008, Gentges instructed UBS to transfer all remaining funds in the 4959 Account and the 4337 Account to accounts at Migros Bank. 

35. In November 2008, Gentges instructed that his retained UBS mail be sent to an
address in Lyss, Switzerland. 

* * * * 

D. Examination and Assessment of Civil Penalties

Government FBAR Willful Penalty Collection Suit and Issuance of Letters Rogatory (8/30/18)

In United States v. Katholos (W.D. N.Y. 17-cv-00531), docket entries here, the Government is suing Katholos for the FBAR willful penalty which remains unpaid (including penalties, statutory additions, interest and late payment penalties) of $4,474,320.29.  The complaint is here; the answer is here.

According to the complaint:

• "As a result of the [UBS] John Doe summons, the United States received information regarding Ms. Katholos' Foreign Bank Account." (Complaint paragraph 7)
• The facts alleged in the complaint seem to be a common fact pattern; the facts are different but the pattern is similar.  Several entities were established.
• The complaint lists a number of transfers from UBS to other financial institutions.  (Complaint par. 25.)
• The Government demands a jury. (See last paragraph.)

The answer has the following affirmative defenses:

• Katholos did not act willfully.  Among the allegations in support of this defense:

50. The Complaint’s case for willfulness appears to rest on three major factual allegations, all of which are either incorrect or misleading. First, the Government alleges that Marika was on “inquiry notice” about FBAR reporting because of a 2007 federal income tax return. At the time of the filing of the Complaint, however, the Government possessed information demonstrating that Marika did not sign the 2007 federal income tax return that allegedly put her on “inquiry notice” regarding her FBAR obligations. Further demonstrating that she did not review this return, the 2007 return filed for Marika contains numerous, obvious errors: Marika’s name is misspelled and her address is incorrectly given in Elma, New York. 

51. Marika’s history of filing U.S. returns since her move to Greece in 1994 demonstrates that she was not fully aware of the relevant U.S. tax rules for reporting income overseas. Prior to 2009, federal tax returns were filed for Marika to report her interests in family assets that generated income in the U.S., such as annuities or rental income from real estate. When there was no U.S. income in a particular year, returns generally were not filed. In many or most cases prior to early 2009, Marika did not see or sign federal tax returns filed for her. 

52. Second, the Internal Revenue Service’s (“IRS’s”) interview with Marika’s return preparer Charles Koelemeyer, conducted more than four years after the relevant events, only demonstrates that he knew of FBAR reporting requirements well after the time period at issue. It does not demonstrate that he ever advised Marika about these requirements—or even that he ever spoke to her directly about taxes or U.S. reporting—prior to January 2009. Instead, once Marika learned of the relevant U.S. reporting requirements, she attempted to make a voluntary disclosure to the IRS in February 2009, months before the start of the formal Offshore Voluntary Disclosure Program. Marika’s effort was rejected as untimely because, on information and belief, UBS had
delivered her name to the IRS within one week prior to her disclosure. 

53. Finally, the Government alleges that Swiss bankers took actions, including signing forms, to conceal the relevant accounts from U.S. authorities. These are simply not allegations that Marika acted willfully: the allegations describe actions taken by Swiss bankers, not by her and her family. Instead, the long history of Marika and her family in Greece demonstrates that the UBS accounts were not set up for a U.S. tax-avoidance purpose. Marika moved to Greece in 1994, shortly after college, and has been a homemaker and caretaker of her children since that time. Marika’s father Theodore Katholos (now deceased) (“Mr. Katholos”) immigrated to the U.S. in the mid-1960s with a second-grade education in Greece, and became successful in the painting and contracting business in Buffalo, New York through hard work and determination, not through formal schooling. Mr. Katholos was largely unable to read or write in English. He was very successful in business, particularly given his background, but he lacked sophistication and training in tax matters. In the 1980s, Mr. Katholos seriously considered emigrating back to Greece, and so did Marika. When Mr. Katholos retired in 1997, he had intended to move back to Greece permanently.

Court of Federal Claims Rejects Colliot; FBAR Willful Penalty Not Limited to $100,000 (8/1/18)

In Norman v. United States (Ct. Fed. Cl. Dkt 15-872T, Order dated 7/31/18), here, the Court held Mindy Norman liable for the FBAR willful penalty.  Basically, on the merits, the Court found that Norman was willful and deceitful about her willfulness.

Perhaps more importantly for most readers of this blog, the Court rejects Colliot's holding that the FBAR willful penalty is limited to a maximum of $100,000, because the regulations had not been changed to reflect the statutory amendment increasing the maximum FBAR willful penalty.  Basically, the Court held that the statute trumps the regulation.

The opinion is very short (9 pages, with the discussion relevant to the Colliot issue being at page 7-9).

The conclusion for the whole opinion is (p. 9):

The Court finds that Ms. Norman’s repeated and admitted lack of care in (1) filing inaccurate official tax documents without any review, (2) signing foreign banking documents without any review, and (3) later providing false sworn statements both to the IRS and to this Court, both with and without review, reaches the standard of reckless disregard for the law required to constitute a willful violation of § 5314. Contrary to Ms. Norman’s new argument in light of Colliot, Congress clearly raised the maximum civil money penalty in § 5321 to the greater of $100,000.00 or one half of the balance of the account. As such, the Court holds that Ms. Norman willfully violated U.S.C. § 5314, and that the assessment of the civil money penalty under 31 U.S.C. § 5321 in the amount of 50 percent of her account’s balance was appropriate. The Court therefore dismisses the case, and the Clerk is directed to enter judgment accordingly.

On the issue of whether the regulation caps the FBAR willful penalty after the statute's amendment, my prior blogs are (reverse chronological order):

• Another District Court Limits IRS Authority for FBAR Willful Penalty to $100,000 (Federal Tax Crimes Blog 7/18/18), here (on the Wadhan case reaching same result as Colliot)
• Update on Colliot Limitation on Discretion for FBAR Willful Penalty (Federal Tax Crimes Blog 7/16/18; 7/18/18), here.
• District Court Caps IRS Authority to Assess Willful FBAR Penalty at $100,000 (Federal Tax Crimes Blog 5/19/18), here.

District Court Grants Government Summary Judgment for FBAR Willfulness Civil Penalty (7/23/18)

In United States v. Markus, 2018 U.S. Dist. LEXIS 118871 (D. N.J. 7/17/18) (unpublished), here, the district court granted summary judgment for the Government on willful FBAR penalties.  The docket entries are here.

In summary, Markus was a combat engineer for the U.S. Army in Iraq and then, after leaving the Army, worked for the U.S. Corps of Engineers deployed in Iraq.  He accepted bribes and kickbacks for confidential information for an oil pipeline.  He deposited the proceeds in bank accounts in Egypt and Jordan.  He filed no FBAR at all for 2007 and 2009 and filed an incomplete FBAR for 2008.  He was convicted for the bribery and kickback claims and for failure to file an FBAR for 2009.

The IRS assessed the following FBAR willful civil penalties:

		Account	Account	Penalty
Year	Bank Account	Number	Balance	Assessed	%
2007	Banque Misr	-2393	$299,250	$100,000	33.4%
2007	Housing Bank I	-70220	$744,854	$372,427	50.0%
2007	Housing Bank II	-201	$90,000	$45,000	50.0%
2008	Banque Misr	-2393	$364,950	$100,000	27.4%
2009	Banque Misr	-2393	$400,000	$218,225	54.6%
2009	Housing Bank III	-80220	$680,000	$6,362	0.9%
				$842,014

The Government filed suit within 2 years of assessment.  Markus represents himself in the case.

The Court held that the assessments and the civil suit were made and instituted, respectively, within the applicable the statutes of limitations and that Markus' prior criminal conviction not involving FBARs (years 2007 and 2008) did not give rise to collateral estoppel.  The court then turned to the merits of the willful penalty assessment.

First, the Court cites the FBAR willful penalty as being the greater of $100,000 or 50% of the balance in the account at the time of the violation.  The Court does not say anything about the issue in Colliot and Wadhan that capped the FBAR willful penalty to $100,000.  See District Court Caps IRS Authority to Assess Willful FBAR Penalty at $100,000 (Federal Tax Crimes Blog 5/19/18) (on Colliot), here; and Another District Court Limits IRS Authority for FBAR Willful Penalty to $100,000 (7/18/18) (on Wadhan), here.

Another District Court Limits IRS Authority for FBAR Willful Penalty to $100,000 (7/18/18)

In United States v. Wadhan (D. Colo. Dkt 17-CV-1287 Dkt Entry 55), here, the Court held that the IRS's discretion to impose FBAR maximum willful penalties is limited to the $100,000 amount in there regulations. The bottom line holding is the same as the Court in United States v. Colliot (W.D. Texas No. AU-16-CA-01281-SS), here.  I discussed Colliot in District Court Caps IRS Authority to Assess Willful FBAR Penalty at $100,000 (Federal Tax Crimes Blog 5/19/18), here.

According to the opinion, "[F]or three violations, the IRS assessed penalties of $1,108,645.41 for 2008, $599,234.54 for 2009, and $599,234.54 for 2010."  Under the opinion, the FBAR willful penalty is limited to a maximum of $100,000 for each of the three years.

The docket entries in Wadhan as of today are here.

Update on Colliot Limitation on Discretion for FBAR Willful Penalty (7/16/18; 7/18/18)

I have written on the Colliot summary judgment limiting the IRS FBAR willful penalty to $100,000.  United States v. Colliot (W.D. Texas No. AU-16-CA-01281-SS), here;  see District Court Caps IRS Authority to Assess Willful FBAR Penalty at $100,000 (Federal Tax Crimes Blog 5/19/18), here.  I have two follow through items.

1.  The Government is asserting in other cases that Colliot was incorrectly decided.  Kimble v. United States (Court Fed. Cl. Dkt. 170521 T, Dkt entry 29), here.

2.  In Colliot, the Government filed an Additional Memorandum dated 6/14/18, here, seeking to mitigate the damage caused by the opinion.  The Government argues that, based on the number and balances in the accounts, even applying the limitation imposed by the court in the opinion, the Government is entitled to most of the penalties assessed.  The key to the claim is that the FBAR willful penalty with the limitation imposed by the court is based per account per year.  Each account could, under the court's opinion, be assessed FBAR willful penalties as follows: (i) $100,000 penalty per account with an amount of $100,000 or more; (ii) the amount in the account when the amount is between $100,000 and $25,000, and (iii) $25,000 when the amount in the account is $25,000 of less.  In Colliot, the defendants had a number of accounts with varying amounts, so the disaggregation of the accounts makes a substantial difference.

The Government argues that the maximum allowed under the Colliot opinion for 14 of the 16 accounts involved would have been $871,300, but that, for those accounts, the Government only assessed $445,314.  (See Table on p. 6.)  The Government thus argues that for those 14 penalties, the assessments “are within the maximum limits set forth in the regulation, and remain unaffected by the Court’s Order” and thus the IRS did not act arbitrarily or capriciously in assessing those penalties.  Further, the Government argues (pp. 7-10), the Court’s order affects only two of the accounts to cap the penalty at $100,000 or $25,000, so that the total penalties assessed for those two accounts is $378,784 and the amount allowed under the court’s order is $125,000.  In net, under the Government’s calculations, the reduction in FBAR willful penalty for those two accounts would be $253,784.

District Court Caps IRS Authority to Assess Willful FBAR Penalty at $100,000 (5/19/18)

In United States v. Colliot (W.D. Texas No. AU-16-CA-01281-SS), a case brought by the U.S. to obtain judgment on an FBAR willful penalty, the Court granted Colliot's motion for summary judgment, holding that the IRS cannot assess a willful penalty in excess of $100,000 despite the statute allowing a penalty assessment of the higher of $100,000 or 50% of the maximum amount in the unreported foreign account(s).  The order granting summary judgment is here.  This is a major holding which will surely follow, could dramatically affect the landscape for cases in the pipeline until the IRS acts to change the regulations landscape on which the decision was based.

First, I offer the relevant documents as follows:

• Colliot's Motion, here.
• U.S. Response to Motion, here, with a diagram, here.
• Colliot's Reply, here.
• U.S. SurReply, here.
• Court Order Granting Colliot's Motion for Summary Judgment, here.
• The docket entries in the case through today, here.

The following is the Court's summary of the relevant facts and regulatory background which, I think, is consistent with the summary judgment submissions by the parties.

A. Legal Framework 

To understand Colliot's argument, it is first necessary to briefly review the history of the provision used to impose civil penalties upon Colliot, 31 U.S.C. § 532 1(a)(5). A previous version of § 5321(a)(5) allowed the Secretary of the Treasury to impose civil monetary penalties amounting to the greater of $25,000 or the balance of the unreported account up to $100,000. See Resp. Mot. Summ. J. [#57] at 2. A related regulation promulgated by the Department of the Treasury via notice-and-comment rulemaking, 31 C.F.R. § 103.57, reiterated that "[f]or any willful violation committed after October 26, 1986 . . . the Secretary may assess upon any person, a civil penalty[] . . . not to exceed the greater of the amount (not to exceed $100,000) equal to the balance in the account at the time of the violation, or $25,000." Amendments to Implementing Regulations Under the Bank Secrecy Act, 52 Fed. Reg. 11436, 11445-46 (1987).  

In 2002, the Treasury delegated the authority to assess penalties under § 532 1(a)(5) to the Financial Crimes Enforcement Network (FinCEN). Treasury Order 180-01, 67 Fed. Reg. 64697 (2002). In addition to this delegation of enforcement authority, Treasury Order 180-01 provided that related regulations were unaffected by this transfer of power and should continue in effect "until superseded or revised." Id. Roughly six months later, FinCEN redelegated  the authority to assess penalties under § 532 1(a)(5) and its related regulation, § 103.57, to the IRS. Mot. Summ. J. [#52-5] Ex. E (Memorandum of Agreement and Delegation of Authority for Enforcement of FBAR Requirements). 

In 2004, Congress amended § 5321 to increase the maximum civil penalties that could be assessed for willful failure to file an FBAR. 31 U.S.C. § 532 1(a)(5); American Jobs Creation Act of 2004, Pub. L. No. 108-357, § 821, 118 Stat. 1418 (2004). Under the revised statute, the civil monetary penalties for willful failure to file an FBAR increased to a minimum of $100,000 and a maximum of 50 percent of the balance in the unreported account at the time of the violation. 31 U.S.C. § 5321(a)(5)(C). 

Despite this change, the regulations promulgated in reliance on the prior version of the statute remained unchanged. Thus, § 103.57 continued to indicate the maximum civil penalty for willful failure to file an FBAR was capped at $100,000. FinCEN subsequently renumbered § 103.57it is now 31 C.F.R. § 1010.820as part of a large-scale reorganization of regulatory provisions. It also amended part of the regulation to account for inflation. Civil Monetary Penalty Adjustment and Table, 81 Fed. Reg. 42503, 42504 (2016). FinCEN did not, however, revise the regulation to account for the increased maximum penalty now authorized under § 5321 (a)(5). 31 C.F.R. § 1010.820. Nevertheless, the IRS did not let § 103.57 (now § 1010.820) constrain its enforcement authority, and since 2004, the IRS has repeatedly levied penalties for willful FBAR violations in excess of the $100,000 regulatory cap. Resp. Mot. Summ. J. [#57] at 3. 

Based on this Framewor, the Court held that, as written, the subsequent legislation did not implicitly repeal the regulation as written which capped the penalty at $100,000.  The reason is that, in its discretion, FinCEN and the IRS can set willful penalties anywhere under the ceilings under the amended § 5321(a)(5)(C) (the higher of $100,000 or 50% of the amount in the accounts) so that, by leaving the regulation in place, FinCEN In effect said that it would exercise that discretion to have a cap of $100,000 despite the statute allowing willful penalties up to 50% in the account(s) if greater than $100,000.  FinCEN and the IRS certainly have that discretion under the statute and, by leaving the regulation in place, exercised that discretion.

The Court summarizes its holding (p. 5):

In sum, § 1010.820 is a valid regulation, promulgated via notice-and-comment rulemaking, which caps penalties for willful FBAR violations at $100,000. 31 C.F.R. § 1010.820. Rules issued via notice-and-comment rulemaking must be repealed via notice-and-comment rulemaking. See Perez v. Mortgage Bankers Ass 'n, 135 S. Ct. 1199, 1206 (2015) (requiring agencies to "use to the same procedures when they amend or repeal a rule as they used to issue the rule in the first instance"). Section 1010.820 has not been so repealed and therefore remained good law when the FBAR penalties in question were assessed against Colliot. Consequently, the IRS acted arbitrarily and capriciously when it failed to apply the regulation to cap the penalties assessed against Colliot. 5 U.S.C. § 706(2) (requiring agency action to be "in accordance with law"); see also Richardson v. Joslin, 501 F.3d 415, (5th Cir. 2007) ("[A]n agency must abide by its own regulations.") (citing United States ex rel. Accardi v. Shaughnessy, 347 U.S. 260 (1954)).
   fn 3  If FinCEN or the IRS wished to preserve their discretion to award the maximum possible penalty for willful FBAR violations under § 5321(a)(5), they might easily have written or revised § 1010.820 to do so. For example, § 1010.820 might have incorporated § 5321 (a)(5) 's maximum penalty thresholds by reference, or alternatively, the IRS might have revised § 1010.820 to reflect the increased penalty limits. Instead, FinCEN and the IRS enacted and then left in place the $100,000 penalty cap.

JAT comments: