Monday, November 5, 2018

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:

1.  All sorts of strange possibilities arise from the theoretical possibility.  For example, if the refund suit with counterclaim goes to trial, does the judge decide the refund suit with findings of fact and conclusions of law required by FRCP Rule 52(a) and the jury decide the counterclaim?

2.  Perhaps Beacon Theatres v. Westover, 359 U.S. 500 (1959), involving related claims which were, supposedly, jury trial and non-jury trials.  Those wanting to chase down that issue should read this case and see whether it really offers guidance, which, if applicable, might suggest that the presence of a counterclaim with right of jury trial forces the refund suit into a jury trial or, alternatively, requires that the jury trial on the counterclaim be tried first with potential collateral estoppel or res judicata effects on the refund claim.

3.  At least in theory, the burden imposed on the taxpayer in a refund suit is different than the burden in a collection suit, so that, since the counterclaim in a refund suit is a collection suit, the burdens in the same suit are different.  That phenomenon likely would not occur in FBAR penalty refund and counterclaim suits, because the Government bears the burden of proof on the penalty.

This is sort of like the eternal reductio ad absurdum of how many angels can dance on the head of a pin.  Still, because of real world consequences, some litigants and some courts may someday have to grapple with that the refund /counterclaim issue.

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