Thursday, May 15, 2014

The Credit Suisse Costs for U.S. Tax Misbehavior is Said to Be $2.5 Billion (with a B) (5/15/14)

The Credit Suisse matter is getting more buzz.  The ante has been upped to $2.5 billion, but that includes a big chuck for the New York and perhaps other regulators, and about $1.7 billion for DOJ in its tax probe.  Devlin Barrett, Credit Suisse to pay about $2.5 billion, end tax probe (WSJ Market Watch 5/15/14), here.

And, the DOJ is said to be pushing for a guilty plea to some significant criminal charge.

Now a billion $ is a lot of money -- but it used to be more in purchasing power.  In the 1960s, the consummate politician, Senator Everett Dirksen (R), is reputed to have said:  "A billion here, a billion there, pretty soon, you're talking real money." (Whether or not he actually said it is reputedly uncertain; see Wikipedia, here.)

Another Dirksen quote is:  "I am a man of fixed and unbending principles, the first of which is to be flexible at all times."  See Wikiquotes here. Dirksen, the Senate leader for the Republicans, could work with Democrats and get things done.


  1. Jack,

    does that argument work? It would seem to me that the IRS would technically be justified to say (as they do in Zwerner) that the actual delinquent tax and any related tax penalty is irrelevant, given that Congress explicitly granted them authority to impose a draconian penalty. Note, I agree with your reasoning (and would hope the IRS does as well) but wonder in practice if they are reasonable in this respect.

  2. The FBAR is independent of the taxes, but it is clear that, if a person is tax compliant, at least as of now, the IRS does not impose an FBAR penalty (or, inside the program, the miscellaneous penalty).

    If that is right (I think it is), the imposing an FBAR or miscellaneous penalty solely because of tax delinquency is simply adding an additional penalty for the tax delinquency. Yet, Congress has established in the Internal Revenue Code the penalties for tax delinquency -- the accuracy related penalty (20 or 40%, depending on the accuracy related penalty) or the fraud penalty (75%). Piling the FBAR penalty on top of that because of the tax noncompliance seems to go beyond what Congress has said is appropriate for tax delinquencies.

    Still, I do recognize that it is a separate penalty, but as administered by the IRS, it is intertwined with the tax delinquency. So that has been my argument, particularly when the FBAR penalty gets way beyond even the civil fraud penalty (if it hypothetically were applied).

    The IRS has not bought my argument, but in all except one case found some way get a very low number for the FBAR penalty.

    Jack Townsend


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