Bittner FBAR Appeal: U.S. Supreme Court Justices Define Three Issues Evidenced By Eleven Key Moments

Written by | Posted in FBAR • Reasonable Cause • TaxConnections
Bittner FBAR Appeal: Supreme Court Justices Define Three Issues Evidenced By Eleven Key Moments

Introduction

On November 2, 2022 the Supreme Court of the United States heard the appeal in the case of:

ALEXANDRU BITTNER, Petitioner, v. UNITED STATES, Respondent

On November 2, 2022 the Supreme Court Of The United States heard the Bittner case. The issue was whether in the context of a non-willful FBAR penalty:

1) The government is restricted to imposing one penalty based on the failure to file one FBAR; or

2) The government is authorized to impose one non-willful penalty for each of the accounts that should have been reported on the single FBAR form.

For example, let’s imagine that a US citizen has ten accounts that are “foreign” and he fails to file an FBAR form. Is the penalty based on the failure to file the form itself (one form means one $10,000 penalty)? Or may the government impose a penalty based on the failure to disclose each of the accounts on the FBAR form (10 times $10,000 = $100,000)?

Mr. Bitter is/was a dual US Romanian citizen who was living in Romania during the years that the FBAR penalties were imposed. According to the closing comments of his lawyer, Mr. Bittner (while living in Romania) had filed US tax returns for years that he had a business connection to the United States (apparently investing in a relative’s business in California). In other words, there is some evidence that Mr. Bittner was not fully aware that as a US citizen, his US tax and reporting obligations applied even when he did not live in the United States. In any case, Mr. Bitter argues that he should have received one $10,000 penalty for each of the five years ($50,000). The government imposed penalties of 2.7 million dollars based on a failure to report 52 accounts.

On Wednesday November 2, 2022 the Supreme Court of the United States heard argument on the “per account vs. per form” issue.

A transcript of the arguments is here:

http://citizenshipsolutions.ca/wp-content/uploads/2022/11/21-1195_5i36.pdf

A post describing the background and some initial discussion is here.

The briefs are available here.

Purpose of this post

The purpose of this post is to identify the questions and dialogue with counsel that suggest which areas the Justices found most important, interesting and troubling. Although one cannot predict the outcome, the dialogue suggests the following three broad themes and areas of concern:

First: Many of the Justices had difficulty agreeing (based on the plain text of 5314) with the Government’s claim that it can impose a separate FBAR penalty based on and only on a failure to report each account. Justices Jackson, Gorsuch and Thomas appeared to be the strongest advocates of this position. (Justices Kagan and Sotomayor comprised the most vocal opposition.)

JR Comment: The issue is whether the Justices will decide the case based on what the statute actually says (which favors the per account interpretation) or based on what they think Congress “might have intended” in the complete legislative scheme. The legal arguments for the “per form” penalty were compelling.

Second: A number of the Justices were clearly troubled by the their view that the “per form” penalty would mean that all non-willful FBAR penalty violators would be assessed penalties based on the “form”. Basing the penalty on and only on single form, would mean that a $10,000 penalty would be the maximum non-willful penalty regardless of the facts. Should a person who fails to report one simple checking account be assessed the same penalty as someone with millions of dollars and multiple accounts? Justices Roberts and Kagan seemed particularly focussed on this issue. (See the audio clip of Justice Roberts below.)

JR Comment: Interestingly the court was not told that non-willful violators can be assessed ZERO penalties. My impression was that the argument proceeded on the basis that the $10,000 penalty was the default penalty for the failure either file the form or report the account.

Third: The court expressed concern over whether “reasonable cause” really was a defence to a civil non-willful penalty assessment. Presumably if “reasonable cause” were a defence, it would serve the purpose of appropriately calibrating penalties. See the clips of Justices Alito, Gorsuch and Jackson below. The concern appeared to be: Does the “reasonable cause” defence work in practical application?

JR Comment: Does the existence of “reasonable cause” make it easier for the Justices to rule that a “per account” penalty may be permitted? Alternatively were the Justices simply concerned by the draconian potential of the penalties?

These are the three “pieces of the puzzle” that I expect will inform the decision.

The complete audio of the hearing is available here:

And a version from C-span (that picks up the audio from some protestors) is here:

https://www.c-span.org/video/?523324-1/bittner-v-united-states-oral-argument

I have included the statutory provision as *Appendix A below.

I have included the regulations as **Appendix B below.

Eleven informative moments in the Bittner appeal

What follows are eleven clips from the argument along with brief commentary about why I think it matters. I have included contributions from all of the Justices except Justice Barrett who did not contribute meaningfully to the discussion.

1. Justice Jackson: Where should the focus be on reading USC 31 5314? On the person, the account(s) or the form?

This is the first of two times in the hearing that Justice Jackson explains her view that USC 31 5314 is focussed on the identity of individual account holder and not on the account(s) held by the individual. Clearly this would undercut the government’s argument that the focus should be on the accounts.

Justice Jackson offers her theory that 5314 has NOTHING to do with identifying specific accounts and EVERYTHING to do with identifying individuals who have foreign accounts. This is the most interesting observation in the discussion. She reframes the debate as: is this about “individuals” (yes), “accounts” (no) and the “form” (no). This is actually the launch of a whole new theory of 5314 interpretation.

2. Justice Gorsuch: Interesting excerpt where he explains/clarifies the difference between willful and non-willful FBAR penalties and how “reasonable cause” (in theory) is available only for the non-willful penalty.

3. Chief Justice Roberts: Justice Roberts is one of several Justices to register concerns about how to properly calibrate penalties. He seems concerned and not comfortable with the “one size fits all” non-willful penalty suggested by Bittner’s lawyer Mr. Geyser. Other Justices share this concern (most notably) Justice Kagan.

4. Justices Kavanaugh and Jackson: They ask questions about “reasonable cause” as a defence to the non-willful penalty. For whom is it available and under what circumstances? They seem concerned to find some kind of defence to all of this.

5. Justice Alito: Continuing the discussion on reasonable cause … He asks the government lawyer specifically whether “ignorance of the law” would constitute “reasonable cause”?

6. Justices Alito, Kavanaugh and Jackson: Reasonable cause continued … The Justices seem very concerned about finding a defence to non-willful FBAR penalties. It appears that the government’s “presumption of penalty” has unnerved them too!

7. Justices Thomas and Jackson: A fascinating and revealing discussion … It seems clear that Justices Thomas and Jackson are not convinced that “accounts” are the focus of the legislation. (Of course if accounts are not the focus of the legislation then it is harder to rule that penalties should be assessed on a per account basis.)

8. Justice Gorsuch: This is really interesting. He “slices and dices” the relevant part of 5321 and suggests that the absence of a reference to “account” is a problem for the government’s case.

9. Justice Kagan: She is committed to the view (apparently) that the focus of both 5314 and 5321 should be on the accounts. In other words, Bittner loses.

10. Justice Sotomayor: She is committed to the view (apparently) that the FBAR statute is about and only about accounts. Bitter loses.

11. Justices Gorsuch and Sotomayor: They ask questions about the 25 account exemption found in the regulations. How does it work? How does one qualify? Does it mean that people with fewer than 25 accounts are more likely to receive FBAR penalties? Interesting revelations from the government lawyer including a reminder that it is taking steps to abolish the 25 account rule.

Conclusion:

Toward a possible new interpretation of 5314 … The Bittner case arrived at the Supreme Court on the basis that the interpretative issue was whether the penalty could be assessed on a per account basis. The focus of the briefs assumed that the focus should be either on the account or on the form. Justice Jackson has introduced the interpretation that the requirements of 5314 can be satisfied if the Treasury regulations identify THE PERSON who has the foreign account (regardless of the number of accounts). It will be interesting to see if this finds its way into the written decision.

The direction this seems to be going … I would say that Justices Jackson and Gorsuch were the dominant voices in the discussion. Both Justices appear to be leaning toward the view that a textual interpretation does NOT justify the imposition of FBAR penalties on a “per account” basis. Justice Jackson goes a step further in suggesting that a proper reading of 5314 is that the focus should be on the individual with the foreign accounts and NOT on either the account or the form. (This militates against an interpretation that the penalty can be assessed on a per account basis.) Justices Kagan and Sotomayor appear to interpret the legislation to be “account” focused.

Should the FBAR statute/law be interpreted based on what it actually says or based on what it might be intended to say (assuming this can be determined)?

*Appendix A – The Statutory Provisions

https://www.law.cornell.edu/uscode/text/31/5314

31 U.S. Code § 5314 – Records and reports on foreign financial agency transactions
U.S. Code

(a)Considering the need to avoid impeding or controlling the export or import of monetary instruments and the need to avoid burdening unreasonably a person making a transaction with a foreign financial agency, the Secretary of the Treasury shall require a resident or citizen of the United States or a person in, and doing business in, the United States, to keep records, file reports, or keep records and file reports, when the resident, citizen, or person makes a transaction or maintains a relation for any person with a foreign financial agency. The records and reports shall contain the following information in the way and to the extent the Secretary prescribes:

(1)the identity and address of participants in a transaction or relationship.
(2)the legal capacity in which a participant is acting.
(3)the identity of real parties in interest.
(4)a description of the transaction.

(b)The Secretary may prescribe—
(1)a reasonable classification of persons subject to or exempt from a requirement under this section or a regulation under this section;
(2)a foreign country to which a requirement or a regulation under this section applies if the Secretary decides applying the requirement or regulation to all foreign countries is unnecessary or undesirable;
(3)the magnitude of transactions subject to a requirement or a regulation under this section;
(4)the kind of transaction subject to or exempt from a requirement or a regulation under this section; and
(5)other matters the Secretary considers necessary to carry out this section or a regulation under this section.

(c)A person shall be required to disclose a record required to be kept under this section or under a regulation under this section only as required by law.
(Pub. L. 97–258, Sept. 13, 1982, 96 Stat. 997.)

The penalty provision with relevant section bolded

https://www.law.cornell.edu/uscode/text/31/5321

31 U.S. Code § 5321 – Civil penalties
U.S. Code

(a)
(1)A domestic financial institution or nonfinancial trade or business, and a partner, director, officer, or employee of a domestic financial institution or nonfinancial trade or business, willfully violating this subchapter or a regulation prescribed or order issued under this subchapter (except sections 5314, 5315, and 5336 of this title or a regulation prescribed under sections 5314, 5315, and 5336), or willfully violating a regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508, is liable to the United States Government for a civil penalty of not more than the greater of the amount (not to exceed $100,000) involved in the transaction (if any) or $25,000. For a violation of section 5318(a)(2) of this title or a regulation prescribed under section 5318(a)(2), a separate violation occurs for each day the violation continues and at each office, branch, or place of business at which a violation occurs or continues.
(2)The Secretary of the Treasury may impose an additional civil penalty on a person not filing a report, or filing a report containing a material omission or misstatement, under section 5316 of this title or a regulation prescribed under section 5316. A civil penalty under this paragraph may not be more than the amount of the monetary instrument for which the report was required. A civil penalty under this paragraph is reduced by an amount forfeited under section 5317(b) of this title.
(3)A person not filing a report under a regulation prescribed under section 5315 of this title or not complying with an injunction under section 5320 of this title enjoining a violation of, or enforcing compliance with, section 5315 or a regulation prescribed under section 5315, is liable to the Government for a civil penalty of not more than $10,000.
(4)Structured Transaction Violation.—
(A)Penalty authorized.—
The Secretary of the Treasury may impose a civil money penalty on any person who violates any provision of section 5324.
(B)Maximum amount limitation.—
The amount of any civil money penalty imposed under subparagraph (A) shall not exceed the amount of the coins and currency (or such other monetary instruments as the Secretary may prescribe) involved in the transaction with respect to which such penalty is imposed.
(C)Coordination with forfeiture provision.—
The amount of any civil money penalty imposed by the Secretary under subparagraph (A) shall be reduced by the amount of any forfeiture to the United States in connection with the transaction with respect to which such penalty is imposed.

(5)Foreign financial agency transaction violation.—
(A)Penalty authorized.—
The Secretary of the Treasury may impose a civil money penalty on any person who violates, or causes any violation of, any provision of section 5314.
(B)Amount of penalty.—
(i)In general.—
Except as provided in subparagraph (C), the amount of any civil penalty imposed under subparagraph (A) shall not exceed $10,000.
(ii)Reasonable cause exception.—No penalty shall be imposed under subparagraph (A) with respect to any violation if—
(I)such violation was due to reasonable cause, and
(II)the amount of the transaction or the balance in the account at the time of the transaction was properly reported.
(C)Willful violations.—In the case of any person willfully violating, or willfully causing any violation of, any provision of section 5314—
(i)the maximum penalty under subparagraph (B)(i) shall be increased to the greater of—
(I)$100,000, or
(II)50 percent of the amount determined under subparagraph (D), and
(ii)subparagraph (B)(ii) shall not apply.
(D)Amount.—The amount determined under this subparagraph is—
(i)in the case of a violation involving a transaction, the amount of the transaction, or
(ii)in the case of a violation involving a failure to report the existence of an account or any identifying information required to be provided with respect to an account, the balance in the account at the time of the violation.

(6)Negligence.—
(A)In general.—
The Secretary of the Treasury may impose a civil money penalty of not more than $500 on any financial institution or nonfinancial trade or business which negligently violates any provision of this subchapter (except section 5336) or any regulation prescribed under this subchapter (except section 5336).
(B)Pattern of negligent activity.—
If any financial institution or nonfinancial trade or business engages in a pattern of negligent violations of any provision of this subchapter (except section 5336) or any regulation prescribed under this subchapter (except section 5336), the Secretary of the Treasury may, in addition to any penalty imposed under subparagraph (A) with respect to any such violation, impose a civil money penalty of not more than $50,000 on the financial institution or nonfinancial trade or business.
(7)Penalties for international counter money laundering violations.—
The Secretary may impose a civil money penalty in an amount equal to not less than 2 times the amount of the transaction, but not more than $1,000,000, on any financial institution or agency that violates any provision of subsection (i) or (j) of section 5318 or any special measures imposed under section 5318A.
(b)Time Limitations for Assessments and Commencement of Civil Actions.—
(1)Assessments.—
The Secretary of the Treasury may assess a civil penalty under subsection (a) at any time before the end of the 6-year period beginning on the date of the transaction with respect to which the penalty is assessed.
(2)Civil actions.—The Secretary may commence a civil action to recover a civil penalty assessed under subsection (a) at any time before the end of the 2-year period beginning on the later of—
(A)the date the penalty was assessed; or
(B)the date any judgment becomes final in any criminal action under section 5322 in connection with the same transaction with respect to which the penalty is assessed.
(c)The Secretary may remit any part of a forfeiture under subsection (c) or (d) [1] of section 5317 of this title or civil penalty under subsection (a)(2) of this section.
(d)Criminal Penalty Not Exclusive of Civil Penalty.—
A civil money penalty may be imposed under subsection (a) with respect to any violation of this subchapter notwithstanding the fact that a criminal penalty is imposed with respect to the same violation.
(e)Delegation of Assessment Authority to Banking Agencies.—
(1)In general.—
The Secretary of the Treasury shall delegate, in accordance with section 5318(a)(1) and subject to such terms and conditions as the Secretary may impose in accordance with paragraph (3), any authority of the Secretary to assess a civil money penalty under this section on depository institutions (as defined in section 3 of the Federal Deposit Insurance Act) to the appropriate Federal banking agencies (as defined in such section 3).
(2)Authority of agencies.—
Subject to any term or condition imposed by the Secretary of the Treasury under paragraph (3), the provisions of this section shall apply to an appropriate Federal banking agency to which is delegated any authority of the Secretary under this section in the same manner such provisions apply to the Secretary.
(3)Terms and conditions.—
(A)In general.—
The Secretary of the Treasury shall prescribe by regulation the terms and conditions which shall apply to any delegation under paragraph (1).
(B)Maximum dollar amount.—
The terms and conditions authorized under subparagraph (A) may include, in the Secretary’s sole discretion, a limitation on the amount of any civil penalty which may be assessed by an appropriate Federal banking agency pursuant to a delegation under paragraph (1).
(f)Additional Damages for Repeat Violators.—
(1)In general.—In addition to any other fines permitted under this section and section 5322, with respect to a person who has previously violated a provision of (or rule issued under) this subchapter, section 21 of the Federal Deposit Insurance Act (12 U.S.C. 1829b), or section 123 of Public Law 91–508 (12 U.S.C. 1953), the Secretary of the Treasury, if practicable, may impose an additional civil penalty against such person for each additional such violation in an amount that is not more than the greater of—
(A)if practicable to calculate, 3 times the profit gained or loss avoided by such person as a result of the violation; or
(B)2 times the maximum penalty with respect to the violation.
(2)Application.—
For purposes of determining whether a person has committed a previous violation under paragraph (1), the determination shall only include violations occurring after the date of enactment of the Anti-Money Laundering Act of 2020.
(g)Certain Violators Barred From Serving on Boards of United States Financial Institutions.—
(1)Definition.—In this subsection, the term “egregious violation” means, with respect to an individual—
(A)a criminal violation—
(i)for which the individual is convicted; and
(ii)for which the maximum term of imprisonment is more than 1 year; and
(B)a civil violation in which—
(i)the individual willfully committed the violation; and
(ii)the violation facilitated money laundering or the financing of terrorism.
(2)Bar.—
An individual found to have committed an egregious violation of the Bank Secrecy Act, as defined in section 6003 of the Anti-Money Laundering Act of 2020, or any rules issued under the Bank Secrecy Act, shall be barred from serving on the board of directors of a United States financial institution during the 10-year period that begins on the date on which the conviction or judgment, as applicable, with respect to the egregious violation is entered.

(Pub. L. 97–258, Sept. 13, 1982, 96 Stat. 999; Pub. L. 98–473, title II, § 901(a), Oct. 12, 1984, 98 Stat. 2135; Pub. L. 99–570, title I, §§ 1356(c)(1), 1357(a)–(f), (h), Oct. 27, 1986, 100 Stat. 3207–24—3207–26; Pub. L. 100–690, title VI, § 6185(g)(2), Nov. 18, 1988, 102 Stat. 4357; Pub. L. 102–550, title XV, §§ 1511(b), 1525(b), 1535(a)(2), 1561(a), Oct. 28, 1992, 106 Stat. 4057, 4065, 4066, 4071; Pub. L. 103–322, title XXXIII, § 330017(a)(1), Sept. 13, 1994, 108 Stat. 2149; Pub. L. 103–325, title IV, §§ 406, 411(b), 413(a)(1), Sept. 23, 1994, 108 Stat. 2247, 2253, 2254; Pub. L. 104–208, div. A, title II, § 2223(3), Sept. 30, 1996, 110 Stat. 3009–415; Pub. L. 107–56, title III, §§ 353(a), 363(a), 365(c)(2)(B)(i), Oct. 26, 2001, 115 Stat. 322, 332, 335; Pub. L. 108–357, title VIII, § 821(a), Oct. 22, 2004, 118 Stat. 1586; Pub. L. 116–283, div. F, title LXIII, §§ 6309, 6310(a), title LXIV, § 6403(b)(1), Jan. 1, 2021, 134 Stat. 4594, 4595, 4623.)

**Appendix B – Treasury Regulations

https://www.law.cornell.edu/cfr/text/31/1010.350

31 CFR § 1010.350 – Reports of foreign financial accounts.
CFR

§ 1010.350 Reports of foreign financial accounts.
(a) In general. Each United States person having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country shall report such relationship to the Commissioner of Internal Revenue for each year in which such relationship exists and shall provide such information as shall be specified in a reporting form prescribed under 31 U.S.C. 5314 to be filed by such persons. The form prescribed under section 5314 is the Report of Foreign Bank and Financial Accounts (TD-F 90-22.1), or any successor form. See paragraphs (g)(1) and (g)(2) of this section for a special rule for persons with a financial interest in 25 or more accounts, or signature or other authority over 25 or more accounts.

(b) United States person. For purposes of this section, the term “United States person” means –

(1) A citizen of the United States;

(2) A resident of the United States. A resident of the United States is an individual who is a resident alien under 26 U.S.C. 7701(b) and the regulations thereunder but using the definition of “United States” provided in 31 CFR 1010.100(hhh) rather than the definition of “United States” in 26 CFR 301.7701(b)-1(c)(2)(ii); and

(3) An entity, including but not limited to, a corporation, partnership, trust, or limited liability company created, organized, or formed under the laws of the United States, any State, the District of Columbia, the Territories and Insular Possessions of the United States, or the Indian Tribes.

(c) Types of reportable accounts. For purposes of this section –

(1) Bank account. The term “bank account” means a savings deposit, demand deposit, checking, or any other account maintained with a person engaged in the business of banking.

(2) Securities account. The term “securities account” means an account with a person engaged in the business of buying, selling, holding or trading stock or other securities.

(3) Other financial account. The term “other financial account” means –

(i) An account with a person that is in the business of accepting deposits as a financial agency;

(ii) An account that is an insurance or annuity policy with a cash value;

(iii) An account with a person that acts as a broker or dealer for futures or options transactions in any commodity on or subject to the rules of a commodity exchange or association; or

(iv) An account with –

(A) Mutual fund or similar pooled fund. A mutual fund or similar pooled fund which issues shares available to the general public that have a regular net asset value determination and regular redemptions; or

(B) Other investment fund. [Reserved]

(4) Exceptions for certain accounts.

(i) An account of a department or agency of the United States, an Indian Tribe, or any State or any political subdivision of a State, or a wholly-owned entity, agency or instrumentality of any of the foregoing is not required to be reported. In addition, reporting is not required with respect to an account of an entity established under the laws of the United States, of an Indian Tribe, of any State, or of any political subdivision of any State, or under an intergovernmental compact between two or more States or Indian Tribes, that exercises governmental authority on behalf of the United States, an Indian Tribe, or any such State or political subdivision. For this purpose, an entity generally exercises governmental authority on behalf of the United States, an Indian Tribe, a State, or a political subdivision only if its authorities include one or more of the powers to tax, to exercise the power of eminent domain, or to exercise police powers with respect to matters within its jurisdiction.

(ii) An account of an international financial institution of which the United States government is a member is not required to be reported.

(iii) An account in an institution known as a “United States military banking facility” (or “United States military finance facility”) operated by a United States financial institution designated by the United States Government to serve United States government installations abroad is not required to be reported even though the United States military banking facility is located in a foreign country.

(iv) Correspondent or nostro accounts that are maintained by banks and used solely for bank-to-bank settlements are not required to be reported.

(d) Foreign country. A foreign country includes all geographical areas located outside of the United States as defined in 31 CFR 1010.100(hhh).

(e) Financial interest. A financial interest in a bank, securities or other financial account in a foreign country means an interest described in this paragraph (e):

(1) Owner of record or holder of legal title. A United States person has a financial interest in each bank, securities or other financial account in a foreign country for which he is the owner of record or has legal title whether the account is maintained for his own benefit or for the benefit of others. If an account is maintained in the name of more than one person, each United States person in whose name the account is maintained has a financial interest in that account.

(2) Other financial interest. A United States person has a financial interest in each bank, securities or other financial account in a foreign country for which the owner of record or holder of legal title is –

(i) A person acting as an agent, nominee, attorney or in some other capacity on behalf of the United States person with respect to the account;

(ii) A corporation in which the United States person owns directly or indirectly more than 50 percent of the voting power or the total value of the shares, a partnership in which the United States person owns directly or indirectly more than 50 percent of the interest in profits or capital, or any other entity (other than an entity in paragraphs (e)(2)(iii) through (iv) of this section) in which the United States person owns directly or indirectly more than 50 percent of the voting power, total value of the equity interest or assets, or interest in profits;

(iii) A trust, if the United States person is the trust grantor and has an ownership interest in the trust for United States Federal tax purposes. See 26 U.S.C. 671-679 and the regulations thereunder to determine if a grantor has an ownership interest in the trust for the year; or

(iv) A trust in which the United States person either has a present beneficial interest in more than 50 percent of the assets or from which such person receives more than 50 percent of the current income.

(3) Anti-avoidance rule. A United States person that causes an entity, including but not limited to a corporation, partnership, or trust, to be created for a purpose of evading this section shall have a financial interest in any bank, securities, or other financial account in a foreign country for which the entity is the owner of record or holder of legal title.

(f) Signature or other authority –

(1) In general. Signature or other authority means the authority of an individual (alone or in conjunction with another) to control the disposition of money, funds or other assets held in a financial account by direct communication (whether in writing or otherwise) to the person with whom the financial account is maintained.

(2) Exceptions – (i) An officer or employee of a bank that is examined by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, or the National Credit Union Administration need not report that he has signature or other authority over a foreign financial account owned or maintained by the bank if the officer or employee has no financial interest in the account.

(ii) An officer or employee of a financial institution that is registered with and examined by the Securities and Exchange Commission or Commodity Futures Trading Commission need not report that he has signature or other authority over a foreign financial account owned or maintained by such financial institution if the officer or employee has no financial interest in the account.

(iii) An officer or employee of an Authorized Service Provider need not report that he has signature or other authority over a foreign financial account owned or maintained by an investment company that is registered with the Securities and Exchange Commission if the officer or employee has no financial interest in the account. “Authorized Service Provider” means an entity that is registered with and examined by the Securities and Exchange Commission and that provides services to an investment company registered under the Investment Company Act of 1940.

(iv) An officer or employee of an entity with a class of equity securities listed (or American depository receipts listed) on any United States national securities exchange need not report that he has signature or other authority over a foreign financial account of such entity if the officer or employee has no financial interest in the account. An officer or employee of a United States subsidiary of a United States entity with a class of equity securities listed on a United States national securities exchange need not file a report concerning signature or other authority over a foreign financial account of the subsidiary if he has no financial interest in the account and the United States subsidiary is included in a consolidated report of the parent filed under this section.

(v) An officer or employee of an entity that has a class of equity securities registered (or American depository receipts in respect of equity securities registered) under section 12(g) of the Securities Exchange Act need not report that he has signature or other authority over the foreign financial accounts of such entity or if he has no financial interest in the accounts.

(g) Special rules –

(1) Financial interest in 25 or more foreign financial accounts. A United States person having a financial interest in 25 or more foreign financial accounts need only provide the number of financial accounts and certain other basic information on the report, but will be required to provide detailed information concerning each account when so requested by the Secretary or his delegate.

(2) Signature or other authority over 25 or more foreign financial accounts. A United States person having signature or other authority over 25 or more foreign financial accounts need only provide the number of financial accounts and certain other basic information on the report, but will be required to provide detailed information concerning each account when so requested by the Secretary or his delegate.

(3) Consolidated reports. An entity that is a United States person and which owns directly or indirectly more than a 50 percent interest in one or more other entities required to report under this section will be permitted to file a consolidated report on behalf of itself and such other entities.

(4) Participants and beneficiaries in certain retirement plans. Participants and beneficiaries in retirement plans under sections 401(a), 403(a) or 403(b) of the Internal Revenue Code as well as owners and beneficiaries of individual retirement accounts under section 408 of the Internal Revenue Code or Roth IRAs under section 408A of the Internal Revenue Code are not required to file an FBAR with respect to a foreign financial account held by or on behalf of the retirement plan or IRA.

(5) Certain trust beneficiaries. A beneficiary of a trust described in paragraph (e)(2)(iv) of this section is not required to report the trust’s foreign financial accounts if the trust, trustee of the trust, or agent of the trust is a United States person that files a report under this section disclosing the trust’s foreign financial accounts.

[76 FR 10245, Feb. 24, 2011, as amended at 76 FR 37000, June 24, 2011]

Have a question? Contact John Richardson, Citizenship Solutions.

The Reality of U.S. Citizenship Abroad

My name is John Richardson. I am a Toronto based lawyer – member of the Bar of Ontario. This means that, any counselling session you have with me will be governed by the rules of “lawyer client” privilege. This means that:

“What’s said in my office, stays in my office.”

The U.S. imposes complex rules and life restrictions on its citizens wherever they live. These restrictions are becoming more and more difficult for those U.S. citizens who choose to live outside the United States.

FATCA is the mechanism to enforce those “complex rules and life restrictions” on Americans abroad. As a result, many U.S. citizens abroad are renouncing their U.S. citizenship. Although this is very sad. It is also the reality.

Twitter 

Subscribe to TaxConnections Blog

Enter your email address to subscribe to this blog and receive notifications of new posts by email.



Post Views: 1,921