June 28, 2022

Supreme Court Will Review High-Stakes FBAR Penalty Circuit Split

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Every year, the Supreme Court passes on the vast majority of cases it is petitioned to decide. Moreover, matters involving tax-related issues are rarely in the minority that are ultimately chosen to be heard. But, typically, an appellate court split piques the Court’s interest more so than other matters—and the current Fifth and Ninth Circuit split in a high-stakes international tax matter asking just how steep civil non-willful foreign account reporting penalties should be has done the job. The Supreme Court granted the Petition for Writ of Certiorari in the case of U.S. v. Bittner.¹ For the taxpayer in Bittner, the decision will determine whether he faces a maximum penalty of $50,000 (aligned with the Ninth Circuit’s position) or $2.72 million (aligned with the IRS and the Fifth Circuit’s position). However, the outcome will also have an enormous and lasting impact on all taxpayers with Foreign Bank and Financial Account Penalties (FBAR) matters.² With so much at stake, we briefly review the basics herein of what the Bittner saga is about.

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What’s the Issue?

The Supreme Court will be reviewing the Bittner case, which hinges on the very definition of “FBAR violation” in the context of civil non-willful FBAR penalties—penalties intended to deter tax evasion and money laundering by those U.S. persons with foreign assets. The term “FBAR” refers to the FinCEN Form 114, Report of Foreign Bank and Financial Accounts. Generally, if the aggregate value of a U.S. person’s foreign bank and financial accounts exceeded $10,000 at any point during the calendar year, they must disclose the maximum account balances on the FBAR. Significantly, a single FBAR is filed each year to report any and all accounts. So, a person with 10 foreign accounts will still only file one FBAR for the year.

Although 31 U.S.C. §5321(a)(5)(B)) prescribes a civil penalty of up to $10,000 for a non-willful “FBAR violation,” the statute fails to define such violation. This statutory omission is the cause of the existing Circuit Court split. The Fifth Circuit, from which Bittner originates, has interpreted it to mean that civil non-willful FBAR penalties may be assessed per account, while the Ninth Circuit has settled on a much more taxpayer friendly “per-form cap.” As noted above, in the Bittner case, the different interpretations result in vastly different penalty amounts—i.e., $50,000 (per form) versus $2.72 million dollars (per account).


The stakes are high for non-willful violators, and many of those siding with the taxpayer in Bittner share the U.S. Chamber of Commerce’s opinion stated on page 3 of its amicus curiae brief supporting petitioner:

The Fifth Circuit’s decision not only sows uncertainty, but it also permits dramatic agency overreach. The government’s reading of the Bank Secrecy Act creates a trap for the unwary, empowering the IRS to threaten unwitting taxpayers with multiple penalties for the non-willful failure to file even a single form. The potential for unfairness is apparent from the facts of this case—the Fifth Circuit’s interpretation ballooned the allowable penalty from $50,000 to more than $2.7 million for an individual taxpayer. The stakes are even higher for American businesses, many of which must engage in a multitude of foreign transactions. Congress never intended to authorize such harsh penalties for non-willful violations.³

Moreover, the government is already authorized under 31 U.S.C. §5321(a)(5)(C) to employ willful FBAR penalties in order to effectively punish those taxpayers who willfully fail to disclose information. And that’s the way it should be. If the Fifth Circuit’s reasoning is upheld, penalties in non-willful cases will sometimes dramatically exceed penalties imposed in cases involving willful misconduct. Such outcomes are inequitable and fail to either deter violations or encourage compliance among those taxpayers who never knew about the FBAR rules in the first place.

Follow us for our continued reporting and analysis on the Bittner saga. If you have questions regarding any international tax call our team at (410) 497-5947 or schedule a confidential consultation here.


  1. United States v. Bittner, No. 20-40597, 2021 BL 456292 (5th Cir. Nov. 30, 2021).
  2. Note that “FBAR” refers to the FinCEN Form 114, Report of Foreign Bank and Financial Accounts.
  3. You can find the brief brief in full at: https://www.supremecourt.gov/DocketPDF/21/21-1195/220044/20220401132405167_Bittner%20Amicus%20Brief.pdf.
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