Million Dollar FBAR Penalty is Not Excessive (2018) – It’s Just Money
In a recent (In Re Garrity) case within the 9th Circuit, the court summarized the complex issues of FBAR Willfulness in the civil vs.criminal arena, along with an explanation about the reduced threshold of proof required to prove willfulness.
- 1 Million Dollar FBAR Penalty
- 2 Case: In Re Garrity
- 3 Even Very High Monetary Penalties…is Still Just Money
- 4 Supreme Court Denies Cert in Another FBAR Willful Case
- 5 $1M+ Willful FBAR Penalty Stands – Cert. Denied
- 6 OVDP & Willfulness – Time is Running Out
- 7 How Does Offshore Voluntary Disclosure Work?
- 8 Golding & Golding, A PLC
Million Dollar FBAR Penalty
In explaining why the threshold to provide willfulness penalties (which can amount to 100% value of the unreported foreign accounts in a multi-year audit) the court opined that…it’s just money.
Case: In Re Garrity
In Garrity (2018), the court addressed this issue(s), and provided the following:
As Congress did not specify the legal standard the Court should apply in a “civil action” brought by the Secretary under section 5321, I must determine what standard of proof applies. The starting point for this inquiry is the well-established principle that “[i]n a typical civil suit for money damages, plaintiffs must prove their case by a preponderance of the evidence.” Herman & MacLean v. Huddleston, 459 U.S. 375, 387 (1983).
The Supreme Court noted in Huddleston that where Congress has not specified a standard of proof, the Court has applied the clear and convincing evidence standard in civil matters only “where particularly important individual interests or rights are at stake,” such as in cases involving termination of parental rights, involuntary commitment, and deportation. 459 U.S. at 389.”
Even Very High Monetary Penalties…is Still Just Money
According to this court, the default position in a civil matter is preponderance of the evidence. And, just because the amount of penalties can be staggeringly high, that in and of itself does not increase the burden. Therefore, even though a person may be subject to hundreds of thousands, if not millions of dollars in FBAR penalties, in reality these are just money penalties in a civil matter and therefore there is no additional burden of proof required by the US government to invoke willful penalties.
Supreme Court Denies Cert in Another FBAR Willful Case
In the matter of In Re Bussell, a similar FBAR issue arose (although the facts appear to be worse for the movant). Previously, we had written a detailed article involving In Re Bussell. Bussell is a California case in which the 9th Circuit affirmed penalties against Buseell exceeding $1,000,000.
During the appeal, Bussell’s attorneys argued (unsuccessfully) that the “Ninth Circuits imposition of the penalty violated the U.S. Constitution’s excessive fines clause and that it was barred by the relevant treaty provisions.”
$1M+ Willful FBAR Penalty Stands – Cert. Denied
In Bussell, based on the underlying facts, the district court found that Bussell had willfully failed to file a FBAR. On Apr. 30, 2018, the Supreme court refused to review the Ninth Circuit’s decision. Accordingly, that decision is now final.
OVDP & Willfulness – Time is Running Out
If you are out of compliance, and were willful, OVDP may be your only option. OVDP is set to expire on September 28, 2018. Therefore, if you are considering OVDP, it is important to speak with an experience OVDP Attorney before it is too late.
How Does Offshore Voluntary Disclosure Work?
IRS Voluntary Disclosure of Foreign or Offshore Accounts is a legal method for getting into IRS Tax and Reporting compliance before the IRS finds you first. At Golding & Golding, we limit our entire tax law practice to IRS Offshore Voluntary Disclosure.
Golding & Golding, A PLC
We have successfully represented clients in more than 1000 streamlined and voluntary disclosure submissions nationwide, and in over 70-different countries.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.