Supreme Court Holds in Bittner that FBAR Nonwillful Penalties are Per Form Rather Than Per Account (2/28/23; 3/5/23)

In Bittner v. United States, 598 U. S. ____ (2/28/2023), here, the Court held that the best interpretation of the nonwillful FBAR penalty is that it applies per form rather than per unreported account. The nonwillful penalty is in 31 U. S. C. §§5321(a)(5)(A) and (B)(i). Five Justices (Gorsuch, the author of the Court opinion, joined by Justices Jackson, Roberts, Alito, and Kavanaugh, so held. Justice Gorsuch included in the opinion a section on the application of lenity (referred to as II-C), in which only Justice Jackson, joined. The opinion of the Court joined by 4 Justices addresses only the interpretation of the nonwillful penalty provision and not Justice Gorsuch’s lenity discussion.

Four Justices dissented—Justices Barret (writing the dissenting opinion) joined by Justices Thomas, Sotomayor, and Kagan and would have held that the best interpretation of the nonwillful penalty was per account rather than per form.

The holding that the nonwillful penalty is per form rather than per account is a significant holding for all with multiple foreign reporting accounts potentially subject to nonwillful penalties. Beyond deciding that issue—per form vs. per account—the opinions merely interpret the statute. I see nothing of systemic value beyond the resolution of the bare issue of per form or per account that is of ongoing importance.  (It is interesting to note that avowed textualists came down on both sides of the issue.)

This is the type of case where it is important to deal with conflicts among the Circuits and, like the doctrine of stare decisis, "because in most matters it is more important that the applicable rule of law be settled than that it be settled right." Burnet v. Coronado Oil & Gas Co., 285 US 393, 406 (1932) (Brandeis dissenting in a tax case). I am mostly agnostic as to the "right" answer to the question of per form or per account. I think I could have credibly argued it both ways. Still, if I were the decider, I think I would have gone with per form rather than per account. My point here, though, is that it is good to have a settled answer.

As a bit of an aside, I note the part of Justice Gorsuch’s opinion—II-C—relating to lenity that attracted only one other Justice and hence is not part of the opinion of the Court. I am reminded of Justice Gorsuch's famous rant in his concurring opinion describing Chevron “elephant in the room” diatribe while on the Tenth Circuit in Gutierrez-Brizuela v. Lynch, 834 F.3d 1142, 1149 (10th Cir. 2016), here. Then Judge Gorsuch wrote the opinion of the panel but then authored a separate concurring opinion with which the other Judges did not agree.

Interesting Motion to Dismiss Government FBAR Willful Penalty Collection Suit (2/6/23)

In United States v. Lisenby (N.D. Ga. Case number 1:22-cv-04579), CL docket entries here, on November 17, 2021, the Government sued Lisenby for recovery of FBAR willful penalties for multiple years. (Dkt entry 1.) On January 31, 2023, Lisenby responded with a motion to dismiss. (Dkt entry 9, here.)  I write here about the memorandum in support of the motion to dismiss.

The memorandum seems to provide a well-written summary of the Government’s claims. The motion to dismiss makes the following claims:

1. The original FBAR assessments were based on the method of calculation that the 11^th Circuit rejected in United States v.  Schwarzbaum, 24 F.4th 1355 (11th Cir. 2022). As explained in the motion (p. 6):

The Government alleges that at some unspecified time following the Eleventh Circuit’s decision in United States v. Schwarzbaum, 24 F.4th 1355 (11th Cir. 2022), the IRS determined it would sua sponte recalculate the penalties assessed against Mr. Lisenby based upon that decision. (Compl. ¶ 61). Despite determining that the Government’s initial assessment was not in compliance with the law (Compl. ¶¶ 61-62), the Government has not alleged that it ever reassessed Mr. Lisenby or gave him an opportunity to pay based upon what it now asserts is the correct assessment.

The motion makes further arguments based on that claim (pp. 7-8). My sense is that the best that can come from this claim is to put Lisenby in the position of Schwarzbaum that, once having made an invalid assessment, the statute has expired on making a recalculated assessment. I think that, while that may be a good argument in Schwarzbaum on its current appeal, the 11^th Circuit is unlikely to accept it because it will certainly know that it screwed up the original Schwarzbaum opinion that they did not realize would give Schwarzbaum an opportunity to escape the penalty. Two mistakes may do rough justice. I have no idea what the court will do in the Lisenby case.

2. The motion claims (pp. 9-11) that, in any event, the assessments (original or recalculated) are out of time. Lisenby’s argument is that the Government's reliance on consents/waivers to extend the time for assessment are invalid because key consents/waivers were signed at some point after the statute of limitations had expired. Lisenby seeks to morph the clear statutory text of § 6501(c)(4) requiring that consents for tax purposes be signed while the statute is still open. The problem Lisenby must overcome is that there is no such statute applicable to the FBAR penalties, so the general rule applies that waivers to statute of limitations defenses can be made at any time. See Court Rejects Government Summary Judgment Motion in FBAR Willful Penalty Collection Suit (Federal 8/28/19), here, on a rejection of a similar defense in the district court Schwarzbaum.