FBAR and the Supreme Court

2022-06-27 22:53:14

The Foreign Account Tax Compliance Act (FATCA), enacted in 2010, generally requires U.S. persons who have financial interests in foreign accounts totaling more than $10,000 at any time during the year to report such information to the Internal Revenue Service (IRS).

In 2012, the Supreme Court heard a case challenging the constitutionality of FATCA on the grounds that it exceeded Congress’s authority under the Taxing and Spending Clause. The Court ultimately upheld the law, reasoning that while FATCA may impose some compliance costs on U.S. taxpayers with foreign accounts, it was a legitimate exercise of Congress’s power to tax and spend for the general welfare.

Since its enactment, FATCA has been credited with helping the IRS uncover billions of dollars in unpaid taxes and preventing tax evasion. However, some critics argue that the law is overly burdensome and intrusive, and that it unfairly targets Americans with foreign financial interests.

The debate over FATCA is likely to continue in the years ahead, as the law continues to have a significant impact on taxpayers with foreign financial interests. For now, though, the Supreme Court’s decision upholding the law is final, and taxpayers must comply with its requirements.

Recently, the U.S. Supreme Court consented to consider the case of Romanian-American businessman Alexandru Bittner, who was fined $2.72 million for failing to submit Form 114, Report of Foreign Bank and Financial Accounts, by the Financial Crimes Enforcement Network (FinCEN) (FBAR).

By granting certiorari in the appeal of the Fifth Circuit's ruling, the Court will probably resolve a disagreement between the Fifth and Ninth circuits regarding whether the maximum civil penalty for non-willful FBAR filing violations is applied per unreported foreign account per year, as the Fifth Circuit held, or per unfiled FBAR covering all foreign accounts per year, as Bittner argued and the Ninth Circuit has held in another case.

Erwin Mattegon