Skip to content

Brought to you by

Dentons logo

US Tax Disputes

Keeping an eye on US tax controversy and litigation developments.

open menu close menu

US Tax Disputes

  • Home
  • About us
  • State and Local (Subnational) Taxation

The Future of FBAR After Bittner

By Gregory Rhodes, Michelle Levin, Ronald Levitt, Mark A. Loyd, Bailey Roese, and J.R. Davidson
March 16, 2023
  • General
  • IRS
Share on Facebook Share on Twitter Share via email Share on LinkedIn

On February 28th, the U.S. Supreme Court decided that the Bank Secrecy Act’s (the “BSA”) $10,000 penalty for the nonwillful failure to file a Report of Foreign Bank and Financial Accounts (or “FBAR”) applies on a per-report and not per-account basis.

The 5-4 decision made a $2,670,000 difference to Alexandru Bittner, a naturalized U.S. citizen who had been living in Romania since the 1990s.  From 2007 through 2011, Mr. Bittner at any one time held between 51 and 61 bank accounts spread across Romania, Switzerland, and Liechtenstein.  As Mr. Bittner failed to file an FBAR report with the Financial Crimes Enforcement Network (or “FinCEN”) for those five years, the IRS determined Mr. Bittner owed the $10,000 penalty for each account he had failed to report—a total of 272 accounts.  The Service therefore imposed a $2.72 million total penalty on Mr. Bittner for tax years 2007—2011.

Justice Gorsuch, writing for the majority, followed the logic of the Ninth Circuit’s 2021 Decision in United States v. Boyd in holding that “Best read, the BSA treats the failure to file a legally compliant report as one violation carrying a maximum penalty of $10,000, not a cascade of such penalties calculated on a per-account basis.  Because the Fifth Circuit thought otherwise, we reverse its judgment and remand the case for further proceedings consistent with this opinion.”

The Court emphasized that the nonwillful nature of Mr. Bittner’s failure to file better aligned with the statutory minimum penalty of $10,000 per report.  If the penalty applied per account, the Court reasoned, a taxpayer who nonwilfully failed to file their FBARs could be penalized much more harshly than willful non-filers, for which there exists a separate statute allowing for greater penalties based on the value of the nondisclosed accounts. 

The key takeaway for taxpayers holding foreign bank accounts or with signature authority over such accounts is to be aware of the FBAR requirement.  The BSA requires taxpayers who possess foreign accounts with an aggregate balance over $10,000 to file the FBAR every year.  Following the Courts holding in Bittner, questions remain as to what remedies may be available to taxpayers who have already paid FBAR penalties on a per-account basis, and whether Congress will enact a safe harbor or grace period for formerly noncompliant filers who now wish to disclose foreign accounts.  Post Bittner, the IRS could be anticipated to more aggressively argue that FBAR violations are willful so as to seek larger penalties.

The case is Bittner v. United States, No. 21-1195, in the U.S. Supreme Court.

Share on Facebook Share on Twitter Share via email Share on LinkedIn
Subscribe and stay updated
Receive our latest blog posts by email.
Stay in Touch
Gregory Rhodes

About Gregory Rhodes

Gregory Rhodes is a shareholder in Dentons Sirote’s Birmingham, Alabama office, where he is a member of the Tax practice group and leads the Dentons Sirote Tax Controversy team. In his practice, Greg focuses on complex tax controversy and tax litigation work.

All posts Full bio

Michelle Levin

About Michelle Levin

Michelle Abroms Levin is a shareholder in Dentons Sirote’s Huntsville, Alabama office, where she is a member of the Tax practice group.

All posts Full bio

Ronald Levitt

About Ronald Levitt

Ronald Levitt is a shareholder in Dentons Sirote’s Birmingham, Alabama office, where he is a member of the Tax practice group and leads the Dentons Sirote Conservation Easement team. His practice focuses on federal and state controversy matters, including planning and defending conservation easements.

All posts Full bio

Mark A. Loyd

About Mark A. Loyd

Mark A. Loyd, co-leader of Dentons' national Tax practice group, has decades of experience successfully resolving his clients’ state, local and federal tax issues. Elected as a Fellow of the American College of Tax Counsel, a distinction reserved for America’s very best tax attorneys, Mark is also Martindale-Hubbell AV® Preeminent™ Rated, the highest rating available, and has been selected as a Super Lawyer since 2015. Leveraging his extensive career in industry and CPA background, Mark has averted, managed and resolved sales, property, income and excise tax and licensing issues through audit management, administrative protest or settlement, and when necessary, through tax litigation in administrative tribunals, state courts and appellate courts, including the US Supreme Court. He’s licensed to practice in Kentucky, Indiana, Ohio, Tennessee, federal district and appellate courts as well as the US Court of International Trade.

All posts Full bio

Bailey Roese

About Bailey Roese

Bailey Roese is a partner in the Firm's Louisville office and represents taxpayers in federal, state, and local tax controversies. Selected as a Kentucky Super Lawyers® Rising Star for 2018 and 2019 in the area of Tax law, Bailey regularly advocates for clients in the state courts and administrative tribunals of Kentucky, Ohio and Indiana, as well as the United States Tax Court.

All posts Full bio

J.R. Davidson

About J.R. Davidson

J.R. Davidson is a Managing Associate in Dentons Sirote’s Birmingham, Alabama office, where he is a member of the Real Estate, Tax, and Corporate practice groups. In his practice, J.R. advises commercial real estate developers and investors, particularly in the multi-family housing market.

All posts Full bio

RELATED POSTS

  • General
  • Individual Taxation
  • IRS
  • IRS Administration
  • Legislation

Tax Reform is Here

By Jeff Erney
  • IRS
  • IRS Administration
  • Partnerships/TEFRA

Substantial Changes to Partnership Tax Audit Procedures will Severely Impact Partner Liability and Rights Before the IRS

By Jeff Erney
  • IRS
  • IRS Administration

IRS To Revise Guidance for In-Person Appeals Conferences

By Jeff Erney

About Dentons

Dentons is designed to be different. As the world’s largest law firm with 20,000 professionals in over 200 locations in more than 80 countries, we can help you grow, protect, operate and finance your business. Our polycentric and purpose-driven approach, together with our commitment to inclusion, diversity, equity and ESG, ensures we challenge the status quo to stay focused on what matters most to you. www.dentons.com

Dentons boilerplate image

Twitter

Categories

Additional resources

Visit our Global tax guide to doing business in... 2022.

global tax guide 2022
Dentons logo

© 2023 Dentons

  • Legal notices
  • Privacy policy
  • Terms of use
  • Cookies on this site